EN - ec.europa.eu · 9/9/2014 · 1.1. Cemex (2) Cemex España is controlled by Cemex, S.A.B. de...

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EUROPEAN COMMISSION DG Competition

CASE M.7054 –CEMEX / HOLCIM

ASSETS

(Only the English text is authentic)

MERGER PROCEDURE

REGULATION (EC) 139/2004

Article 8 (1) Regulation (EC) 139/2004

Date: 9/9/2014

This text is made available for information purposes only. A summary of this decision is

published in all EU languages in the Official Journal of the European Union.

Parts of this text have been edited to ensure that confidential information is not disclosed;

those parts are enclosed in square brackets and marked with an asterisk.

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EUROPEAN COMMISSION

Brussels, 9.9.2014

C(2014) 6299 final

COMMISSION DECISION

of 9.9.2014

addressed to:

Cemex España, S.A. (Spain)

declaring a concentration to be compatible with the internal market

and the functioning of the EEA Agreement

(Case M.7054 – Cemex / Holcim Assets)

(Only the English version is authentic)

PUBLIC VERSION

EN 2 EN

TABLE OF CONTENTS

1. THE PARTIES ............................................................................................................. 7

1.1. Cemex .......................................................................................................................... 7

1.2. Holcim .......................................................................................................................... 7

2. THE PROPOSED TRANSACTION AND THE CONCENTRATION ...................... 7

3. UNION DIMENSION ................................................................................................. 8

4. PROCEDURE .............................................................................................................. 8

5. OVERVIEW OF THE CEMENT INDUSTRY ........................................................... 9

6. GREY CEMENT ....................................................................................................... 10

6.1. Relevant product market ............................................................................................ 10

6.1.1. Previous decisional practice ....................................................................................... 10

6.1.2. The Notifying Party's arguments ................................................................................ 11

6.1.3. Responses to the market investigation ....................................................................... 11

6.1.3.1. White versus grey cement .......................................................................................... 11

6.1.3.2. Classes ........................................................................................................................ 12

6.1.3.3. Bagged versus bulk .................................................................................................... 12

6.1.4. Conclusion on the product market definition ............................................................. 12

6.2. Relevant geographic market ....................................................................................... 13



6.2.3. Responses to the market investigation and the Commission’s assessment................ 14

6.2.4. Conclusion on the geographic market definition ....................................................... 15

6.3. The competitive landscape ......................................................................................... 16

6.3.1. The Parties' activities ................................................................................................. 16

6.3.2. Other suppliers and their production facilities ........................................................... 17

6.4. Market shares and market structure ........................................................................... 18

6.5. Competitive assessment - non-coordinated effects .................................................... 20

6.5.1. Analytical framework ................................................................................................. 20


6.5.3. The Commission's assessment ................................................................................... 24

6.5.3.1. Assessment of the Levante region clusters ................................................................ 24

(a) Market shares and market structure ........................................................................... 25

(b) Closeness of competition ........................................................................................... 27

(c) Ability and incentives of competitors to increase supply if the merged entity were to

increase prices ............................................................................................................ 29

(i) Grinding mills will have the possibility to source clinker from alternative sources .. 30

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(ii) The level of spare capacity held by the competitors of the Parties ............................ 32

(d) Conclusion.................................................................................................................. 32

6.5.3.2. Assessment of the Centre region clusters ................................................................... 33

6.5.3.3. Assessment of the Other regions of Spain clusters .................................................... 34

6.5.4. Conclusion on non-coordinated effects ...................................................................... 35

6.6. Competitive assessment - Coordinated effects .......................................................... 35

6.6.1. Framework of assessment .......................................................................................... 35


6.6.3. Assessment of the Centre region clusters ................................................................... 39

6.6.3.1. Assessment of a strengthening of potential current coordination .............................. 39

(a) Assessment of potential current coordination ............................................................ 40

(i) Evidence of potential current coordination ................................................................ 40

(1) Market investigation ................................................................................................... 40

(2) The Commission's quantitative analysis .................................................................... 41

(ii) Possible facilitating factors of potential current coordination ................................... 43

(1) Reaching terms of coordination ................................................................................. 43

(2) Monitoring deviations - Transparency ....................................................................... 45

(3) Deterrence mechanism ............................................................................................... 47

(4) Reactions of customers, outsider competitors and potential entry ............................. 49

(iii) Conclusion on potential current coordination ............................................................ 51

(b) Assessment of merger-specific changes ..................................................................... 51

6.6.3.2. Assessment of a potential creation of coordination ................................................... 51

6.6.4. Conclusions on coordinated effects ........................................................................... 52

6.7. Competitive assessment - Vertical effects ................................................................. 52

6.7.1. Analytical framework ................................................................................................. 52

6.7.2. Notifying Party's arguments ....................................................................................... 53


6.7.4. Conclusions on vertical effects .................................................................................. 54

6.8. Conclusion on grey cement ........................................................................................ 54

7. AGGREGATES ......................................................................................................... 54

7.1. Relevant product market definition ............................................................................ 54




7.2. Relevant geographic market definition ...................................................................... 55



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7.3. Competitive assessment ............................................................................................. 56




7.4. Conclusion on aggregates .......................................................................................... 57

8. READY MIX-CONCRETE ....................................................................................... 57















8.4. Conclusion on ready mix-concrete ............................................................................. 61

9. MORTAR ................................................................................................................... 62















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9.4. Conclusion on mortar ................................................................................................. 67

10. CLINKER .................................................................................................................. 67








10.2.2. The Notifying Party's argument ................................................................................. 68




10.3.1. Parties' activities ......................................................................................................... 68


10.4. Conclusion on clinker ................................................................................................ 69

11. CONCLUSION .......................................................................................................... 69

EN 6 EN

COMMISSION DECISION

of 9.9.2014

declaring a concentration to be compatible with the internal market and the EEA

agreement

(Case M.7054 - CEMEX / HOLCIM ASSETS)

(Only the English text is authentic)

THE EUROPEAN COMMISSION,

Having regard to the Treaty on the Functioning of the European Union,

Having regard to the Agreement on the European Economic Area, and in particular Article 57

thereof,

Having regard to Council Regulation (EC) No 139/2004 of 20 January 2004 on the control of

concentrations between undertakings1, and in particular Article 8(1) thereof,

Having regard to the Commission's decision of 23 April 2014 to initiate proceedings in this case,

Having given the undertakings concerned the opportunity to make known their views on the

objections raised by the Commission,

Having regard to the opinion of the Advisory Committee on Concentrations2,

Having regard to the final report of the Hearing Officer in this case 3,

Whereas:

(1) On 28 February 2014, the European Commission received a notification of a

proposed transaction by which Cemex España, S.A. ("Cemex España", Spain) (the

"Notifying Party") intends to acquire sole control over the production and

distribution assets of Holcim España, S.A. ("Holcim Assets")4, in cement, ready-mix

concrete ("RMX"), aggregates and mortar in Spain (“the proposed transaction”).5

Cemex España and Holcim España together will be referred to as "the Parties".

1 OJ L 24, 29.1.2004, p. 1 ("the Merger Regulation"). With effect from 1 December 2009, the Treaty on

the Functioning of the European Union ("TFEU") has introduced certain changes, such as the

replacement of "Community" by "Union" and "common market" by "internal market". The terminology

of the TFEU will be used throughout this decision. 2 OJ C 438, 06/12/2014, p.17.

3 OJ C 438, 06/12/2014, p.19.

4 The Holcim Assets also include a number of companies owned by Holcim España S.A. that are

unrelated to the building materials sector. These companies are Filona S.R.L. (holding of shares and

participations), Geocycle España, S.A. (collection, treatment and sale of polluting waste for disposal

and/or recovery), Holcim Logística S.L. (road transport of goods), and Vera Consignatarios, S.L. (ship

consignment). The Holcim Assets, however, do not include Holcim Trading, S.A., a company dedicated

to the trading and transport of cementitious products from various locations around the world. 5 OJ C 72, 11.3.2014, p. 34.

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1. THE PARTIES

1.1. Cemex

(2) Cemex España is controlled by Cemex, S.A.B. de C.V., which is headquartered in

Mexico and, along with the rest of the Cemex companies, constitutes the Cemex

Group. All companies of the Cemex Group are hereinafter referred to as "Cemex".

(3) Cemex is a global building materials company active in cement, RMX, aggregates

and related building materials. It has operations in Africa, the Americas, Asia,

Europe and the Middle East. In Spain, Cemex undertakes its activities through the

Notifying Party, which is the sole holding company of Cemex España Operaciones

S.L.U. ("Cemex España Operaciones", Spain), which owns Cemex's cement, mortar,

concrete plants and aggregate quarries in Spain.

1.2. Holcim

(4) The Holcim Assets include plants and quarries dedicated to the production and

supply of cement, aggregates, RMX and mortar in Spain. The Holcim Assets are

currently controlled by Holcim Ltd ("Holcim"), a joint stock company established

under Swiss Law, which is the ultimate parent company of the Holcim Group. All

companies of the Holcim Group are hereinafter referred to as "Holcim".

(5) Holcim is a global supplier of cement, aggregates, mortar, RMX, asphalt,

cementitious materials and related building materials with operations in more than 70

countries.

2. THE PROPOSED TRANSACTION AND THE CONCENTRATION

(6) On 12 July 2013, Holcim and Cemex signed a Memorandum of Understanding

("MoU") concerning a series of transactions by which Holcim will acquire certain

Cemex assets located primarily in western Germany ("Cemex West") whilst Cemex

will acquire control of the whole of Holcim's activities in cement, RMX and

aggregates in the Czech Republic and Spain. According to the terms of the MoU, the

transactions are related and dependent on each other.6

(7) In order to compensate for the valuation difference between Holcim's Czech business

(to be acquired by Cemex) and Cemex West, Holcim will pay Cemex an amount of

EUR 70 million at closing. In consideration for contributing its operations in Spain to

Cemex, Holcim will acquire a 24.9 % minority shareholding in Cemex España

Operaciones, the company which will combine the Spanish activities of each of the

Parties in cement, mortar, RMX and aggregates.7 Holcim has an exit right that allows

it to sell its shareholding in Cemex España Operaciones after a five-year period.

(8) The transactions subject to the MoU cannot be assessed under Regulation (EC) No

139/2004 as a single concentration as two or more transactions can only be regarded

as a single concentration if control is ultimately acquired by the same undertaking.8

The transaction relating to the acquisition of Cemex West by Holcim had a Union

dimension and was declared compatible with the internal market and the EEA

6 See MoU, section C.2.

7 Based on the MoU, these minority rights will not confer on Holcim any degree of control over Cemex

España Operaciones. 8 See paragraph 41 of the Commission Consolidated Jurisdictional Notice under Council Regulation (EC)

No 139/2004 on the control of concentrations between undertakings (OJ C 95, 16.4.2008, p. 1).

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Agreement by the Commission on 5 June 2014.9 In contrast, the parallel transactions

relating to the acquisition by Cemex of Holcim's businesses in Spain and the Czech

Republic do not have a Union dimension.

(9) As a result of the proposed transaction Cemex España will acquire sole control over

the Holcim Assets and the related business and activities of Holcim in the markets

for cement, RMX, aggregates and mortar in Spain.

(10) Therefore, the proposed transaction constitutes a concentration within the meaning of

Article 3(1)(b) of Regulation (EC) No 139/2004.

3. UNION DIMENSION

(11) The proposed transaction does not meet the turnover thresholds of Article 1(2) or

Article 1(3) of Regulation (EC) No 139/2004. It does therefore not have a Union

dimension.

(12) The Commission decided, however, to examine the proposed transaction by adopting

a decision on 18 October 2013 pursuant to Article 22(3) of Regulation (EC) No

139/2004. That decision followed a request from Spain of 12 September 2013

pursuant to Article 22(1) of the aforementioned Regulation.10

4. PROCEDURE

(13) The proposed transaction was notified to the Commission on 28 February 2014.

(14) On 23 April 2014, the Commission found that the proposed transaction raised serious

doubts as to its compatibility with the internal market and the EEA Agreement.

Therefore, the Commission adopted a decision to initiate proceedings pursuant to

Article 6(1)(c) of Regulation (EC) No 139/2004 ("the Article 6(1)(c) decision").

(15) On 24 April 2014, the Commission provided non-confidential versions of certain key

submissions of third parties collected during the Phase I investigation to the

Notifying Party.

(16) On 6 May 2014, the Notifying Party submitted its written comments on the Article

6(1)(c) decision (“Reply to the Article 6(1)(c) decision”), together with two reports,

one concerning the Madrid area11

and the other one the Levante area.12

On 23 May

2014, the Notifying Party submitted amended versions of its two reports.

(17) On 3 July 2014, the Commission adopted a Statement of Objections ("SO") pursuant

to Article 18 of Regulation (EC) No 139/2004.

(18) Cemex replied to the SO on 17 July 2014 (“Reply to the SO”) and requested the

opportunity to develop its arguments at a formal Oral Hearing. Holcim also replied to

the SO on the same date.

9 Commission’s decision of 5 June 2014 in Case M.7009 – Holcim/Cemex West.

10 By letter of 1 October 2013 the Czech Republic informed the Commission of its decision not to join

Spain in its request for a referral under Article 22(1) of Regulation (EC) No 139/2004. The parallel

transaction relating to the acquisition by Cemex of Holcim's businesses in the Czech Republic was

cleared without conditions by the Czech Office for the Protection of Competition on 12 March 2014. 11

See Reply to the Article 6(1)(c) decision, Annex 2 "Coordinated effects in Madrid: additional economic

assessment". 12

See Reply to Article 6(1)(c) decision, Annex 3 "Unilateral effects in Levante: economic assessment".

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(19) The Oral Hearing was held on 23 July 2014. A representative of Holcim and its

external legal advisors also attended the Oral Hearing.

(20) On 28 July 2014, the Notifying Party agreed with the Commission to extend the

periods previously set pursuant to Article 10(3) second subparagraph, third sentence

of Regulation (EC) No 139/2004 by five working days.

(21) The Advisory Committee on Concentrations met on 26 August 2014.

5. OVERVIEW OF THE CEMENT INDUSTRY

(22) The proposed transaction concerns the building materials industry and more

specifically cement, clinker, RMX, mortar and aggregates, which both Parties

produce and sell.

(23) The acquired assets of the proposed transaction are: (i) 4 cement manufacturing

facilities13

; (ii) 91 RMX plants; (iii) 30 aggregates quarries; and (iv) 5 mortar

plants.14

(24) Cement is one of the main input products in modern construction. Cement is used as

an intermediary product, mainly for the production of RMX, and also in the

production of concrete products and mortar.15

Cement is a fine powder used in the

building and construction sector because it has the power to set to a hard mass when

mixed with water. There are two main types of cement, white cement and grey

cement. The Parties' activities only overlap in grey cement as Holcim is not active in

white cement in Spain.

(25) Clinker is the main raw material used in the production of cement. It is produced

through the conversion of limestone in a thermal, chemical reaction to the desired

calcined mineral. It is then ground and blended with gypsum and/or other

components to the desired cement product, either in a specific grinding mill or within

the cement plant. Therefore, the Notifying Party argues that there are two main types

of cement production facilities in Spain: integrated cement plants and grinding

mills.16

(26) An integrated cement plant is a manufacturing facility that covers the entire cement

production process. This includes the following steps: (i) raw material extraction or

mining from a quarry; (ii) raw material preparation and blending, i.e. limestone and

clay or shale crushing; (iii) raw feed preparation out of the raw materials in the form

of meal; (iv) clinker production, which forms the main process, converting raw feed

in a thermal, chemical reaction to the desired calcined mineral (the 'clinker' that has

the actual hydraulic properties in cement); (v) grinding and blending of clinker with

gypsum and/or other components to the desired cement product including storage;

and (vi) cement products handling for, and including, dispatch.17

13

Three of the four cement facilities are integrated plants and are located in Almeria (Gador and

Carboneras) and the province of Cadiz (Jerez). The fourth plant has been transformed into a grinding

station and is located in the province of Toledo (Yeles). See recitals (26) and (27) for a definition of the

terms "integrated plants" and "grinding station". 14

[…]. 15

Form CO, paragraph 57. 16


Form CO, paragraph 59.

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(27) A grinding mill typically does not include the mining and the thermal process of

producing the clinker, but the final grinding and blending steps, with clinker and

other cementitious materials being delivered from a separate plant or sourced

elsewhere.18

(28) In Spain, there are mainly two sources of clinker: (i) the integrated cement plants and

(ii) imports. Imports of clinker have traditionally been important for the coastal areas

of Spain, such as Levante. The imported clinker comes mainly from non-EU

countries such as China, Thailand, Turkey and Egypt. Sales of clinker produced by

integrated cement plants in Spain to third parties typically take place at a more

regional level.

(29) Aggregates encompass the three primary raw materials used in construction and civil

engineering: gravel, crushed rock and sand.19

(30) RMX is produced by mixing cement and aggregates with water. Concrete is mixed

either on-site or, more commonly, in a dedicated plant before being subsequently

transported to the point of use in specific mixer trucks.20

(31) Mortar is a building material obtained from the mixture of a binding material (cement

and/or lime), sand and water. It is used, among other things, for bonding bricks and

stones, as well as for rendering and plastering.21

(32) The proposed transaction gives rise to affected markets with regard to grey cement,

aggregates, RMX, mortar and clinker.

(33) As the proposed transaction does not give rise to affected markets with regard to

white cement, this market will not be discussed further in this Decision.

6. GREY CEMENT

6.1. Relevant product market

6.1.1. Previous decisional practice

(34) As mentioned in recital (24), there are two main types of cement: white cement and

grey cement. In past decisions, the Commission has defined distinct product markets

for white cement and grey cement.22

(35) Within grey cement, there are a large number of different classes available and

further grades can be produced according to customer requirements. Cement classes

are defined by strength development and setting times, which are in turn determined

by the proportions and nature of the different raw cementitious products used to

18



Form CO, paragraphs 99 and 100. 21


Commission’s decision of 14 March 2005 in Case No COMP/M.3713 – Holcim/Aggregate Industries,

paragraph 7; Commission’s decision of 8 December 2004 in Case No COMP/M.3572 – Cemex/RMC,

paragraph 11; Commission’s decision of 28 May 2004 in Case No COMP/M.3415 –

CRH/SEMAPA/Secil JV, paragraph 10; Commission’s decision of 1 March 2001 in Case No

COMP/M.2317 – Lafarge/Blue Circle (II), paragraph 9; Commission’s decision of 11 November 1998

in Case No COMP/M.1157 – Skanska/Scancem, paragraph 31; and Commission’s decision of 5 June

2014 in Case No/M.7009 – Holcim/Cemex West, paragraph 24.

EN 11 EN

make that particular cement type.23

The EU standard EN 197-1 defines five classes

of common cement that comprise Portland cement as a main constituent.24

Table 1: Classes of common cement according to EN 197-1

CEM I Portland cement Comprising Portland cement and up to 5% of minor

additional constituents

CEM II Portland-composite

cement Portland cement and up to 35% of other single constituents

CEM III Blast furnace cement Portland cement and higher percentages of blast furnace slag

CEM IV Pozzolanic cement Portland cement and up to 55% of pozzolanic constituents

(volcanic ash)

CEM V Composite cement Portland cement, blast furnace slag or fly ash and pozzolana

Source: European Committee for Standardisation.

(36) In the past the Commission has considered that the market for grey cement should

not be further segmented according to grades or classes (CEM I to CEM V).25

(37) Moreover, grey cement is sold both bulk and bagged.26

Bags containing about

25-30 kg of grey cement are sold through do-it-yourself stores and building material

retailers whereas bulk grey cement meets the demand of RMX plants, plants

producing concrete products and building sites.27

6.1.2. The Notifying Party's arguments

(38) The Notifying Party submits that there is an overall market for the manufacture and

sale of grey cement, regardless of its grade and packaging.28

The Notifying Party

submits that the main suppliers are in a position to produce different types and

packaging of grey cement. Moreover, there is a large degree of demand-side

substitutability since both bulk cement and bagged cement are suitable substitutes for

customers and represent modalities of distribution rather than product characteristics.

6.1.3. Responses to the market investigation

6.1.3.1. White versus grey cement

(39) The market investigation in this case has supported the Commission's earlier findings

and the Notifying Party's view that grey cement and white cement constitute separate

product markets.

(40) Most of the competitors and the vast majority of customers that responded to the

market investigation distinguished between white cement and grey cement.

Customers explained that white cement is used for different purposes and is more

expensive than grey cement. Moreover, competitors explained that grey cement and

23

See UK Competition Commission's report of 1 May 2012: "Anglo American PLC and Lafarge S.A.: A

report on the anticipated construction materials joint venture between Anglo American PLC and

Lafarge S.A.". 24

Commission’s decision of 5 June 2014 in Case No M.7009 – Holcim/Cemex West, paragraph 36. 25


Commission's decision of 16 May 2011 in Case No COMP/M.6153 – Anglo American/Lafarge/JV,

paragraph 25; Commission’s decision of 4 March 2008 in Case No COMP/M.4898, Compagnie De

Saint-Gobain /Maxit, paragraph 210; and Commission’s decision of 5 June 2014 in Case No M.7009 –

Holcim/Cemex West, paragraph 39. 27



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white cement are different, mainly for the following reasons: (i) the raw material

used for their production is different, (ii) it is difficult to produce grey and white

cement at the same production site and (iii) the production cost of white cement is

higher than grey cement.29

6.1.3.2. Classes

(41) The market investigation in this case has supported the Commission's earlier findings

that the market for grey cement should not be further segmented according to grades

or classes (CEM I to CEM V).

(42) A large majority of competitors indicated that cement producers are able to switch

between the production of different cement classes (for instance from CEM I to

CEM III) at short notice and without incurring significant costs, although there may

be some constraints with regard to specific raw materials for certain classes of

cement.30

A large majority of customers indicated that the suppliers of the different

grades of cement are usually the same.31

As one customer observed "the national

producers of cement often have the full range of these types of cement".32

6.1.3.3. Bagged versus bulk

(43) The market investigation in this case has supported the Commission's earlier

findings33

that the market for grey cement could be further segmented according to

whether grey cement is sold bulk or bagged.

(44) First, although suppliers of grey cement in Spain that responded to the market

investigation indicated that they sell both bulk and bagged cement, additional

investment would be required to switch production from bulk cement to bagged

cement if there is no bagging and palletising installation in place.34

(45) Second, from the demand-side perspective there appear to be differences in terms of

customers, prices and performance. Nearly all the customers that responded to the

market investigation have not switched from bagged to bulk cement (and vice versa)

and the majority of customers would not switch from bagged to bulk cement (and

vice versa) in case of a small but significant non-transitory increase in price.35

6.1.4. Conclusion on the product market definition

(46) In light of the above, the Commission considers that for the purpose of the

assessment of the proposed transaction, the relevant product market is the overall

market for grey cement. However, the exact product market definition can be left

29

See replies to question 23 - Phase I questionnaire to competitors-cement, replies to question 10 - Phase I

questionnaire to customers-cement and replies to question 9 - Phase II questionnaire to customers-

cement (Q7). 30

See replies to question 27 - Phase I questionnaire to competitors-cement. 31

See replies to question 18 - Phase I questionnaire to customers-cement. 32

The Spanish original reads "Los productores nacionales de cemento suelen disponer de la gama

completa que abarca estos diferentes tipos de cemento". See reply to question 18 - Phase I

questionnaire to customers-cement. 33


See replies to questions 24 and 25 - Phase I questionnaire to competitors-cement and replies to question

2 - Phase II questionnaire to competitors-cement. 35

See replies to question 17 - Phase I questionnaire to customers-cement and replies to question 16 -

Phase II questionnaire to customers-cement (Q7).

EN 13 EN

open since the competitive assessment would not change even if a narrower

segmentation between bagged and bulk grey cement were considered.36

6.2. Relevant geographic market


(47) In past decisions, the Commission has considered that the geographic market for grey

cement consists of a group of geographic markets centred on different cement plants,

overlapping one another.37

The scope of the relevant geographic markets was

determined by the distance from the plant at which cement may be sold.

(48) In previous decisions, the Spanish Competition Authority (Comisión Nacional de los

Mercados y la Competencia, "CNMC") has analysed the geographic market for grey

cement by zones encompassing several Autonomous Communities,38

such as the

Centre zone (comprising the Autonomous Communities of Madrid, Castilla-La

Mancha, Castilla-Leon and Extremadura), the zone of Levante (comprising the

Autonomous Communities of Cataluña, Valencia and Murcia), and the Autonomous

Community of Andalusia.39

The precise geographic market was, however, ultimately

left open.


(49) The Notifying Party submits that the relevant geographic market for grey cement

covers the territory of mainland Spain. Alternatively, it submits that the relevant

geographic markets comprise "clusters" of provinces included in circles defined by

150 or 250 km radii around the Parties' plants.40

(50) The Notifying Party puts forward the following element in this respect. Grey cement

is a relatively heavy product with low added value, for which transportation is a very

relevant cost element and competitive driver. In consequence, grey cement will

normally not travel much further than a given distance from the plant even if a

faraway customer would be prepared to pay a premium price for it.41

(51) As concerns the methodology for determining clusters, the Notifying Party defines

the radii based on linear distances, that is to say, based on the shortest distance

36

According to the Notifying Party, sales of bulk grey cement accounted for [80-90]* % of its overall

grey cement sales with the remaining [10-20]* % being bagged. For Holcim, the split is [70-80]* % /

[20-30]* %. In light of the foregoing, the Notifying Party submitted market shares for its competitors

for the bulk and bagged grey cement segments by splitting the overall grey cement market by [80-90]*

% (bulk) / [20-30]* % (bagged). The overall results of the market investigation support this

approximation. 37

Commission’s decision of 6 July 1994 in Case No IV/M.460 – Holdercim/Cedest, paragraph 16;

Commission’s decision of 16 December 1997 in Case No COMP/M.1030 – Lafarge/Redland, paragraph

16; Commission’s decision of 11 November 1998 in Case No COMP/M.1157 – Skanska/Scancem,

paragraph 56; Commission’s decision of 1 March 2001 in Case No COMP/M.2317 – Lafarge/Blue

Circle (II), paragraph 8; Commission’s decision of 8 December 2004 in Case No COMP/M.3572 –

Cemex/RMC, paragraph 20 and Commission’s decision of 5 June 2014 in Case No M.7009 –

Holcim/Cemex West, paragraph 63. 38

An autonomous community is a political and administrative division of Spain, which includes one or

several provinces. 39

CNMC's decision (ex-CNC) of 30 July 2013 in Case No C/0517/13 - Cementos Molins/Cemex-Activos,

paragraph 32, CNMC's decision (ex-CNC) of 19 November 2008 in Case No C/0112/08 -

Cemex/Oriónidas, section IV.2, and CNMC's decision (ex-CNC) decision of 13 March 2008 in Case No

C/0052/08 - Lafarge/Grupo GLA, section V.2.1. 40

Reply to the SO, paragraph 6 and Form CO, paragraph 82. 41


EN 14 EN

between two points. Additionally, when calculating the total size of the cement

market in each territorial cluster based upon a 150/250 km radius around a particular

cement plant, the Notifying Party includes the provinces totally or partially

comprised in that radius.42

This means that even if a significant fraction of a province

geographically lies outside the boundary of the relevant radius, it is nonetheless

included by the Notifying Party in that cluster.

6.2.3. Responses to the market investigation and the Commission’s assessment

(52) The Commission considers that the relevant geographic markets in this case should

be defined not as national but as circular areas around the relevant cement plants

reflecting the distance up to which cement suppliers can economically sell cement. In

that regard, the Commission considers that 150 km is the appropriate radii of the

circle around the relevant grey cement plants.

(53) Responses to the market investigation supported the Commission’s view that the

relevant geographic market for grey cement in this case is not national in scope.

(54) First, a large majority of respondents to the market investigation indicated that the

competitive conditions are not homogeneous throughout the territory of Spain. In

particular, respondents claimed that prices and suppliers differ according to the

region considered.43

As one competitor indicated, "The impact of the transport costs

on the final price of grey cement is high. Therefore, the competition in a particular

area depends on the number of suppliers who are able to sell there with similar

transport costs".44

Moreover, the majority of the competitors that responded to the

market investigation indicated that the average transport costs for supplying a

customer located at a distance of 150 km is between 5-10 % of the final price,

increasing to 15-20 % for a distance of 250 km.45

(55) Second, cement suppliers that responded to the market investigation indicated that

more than 70 % of their total sales of grey cement are supplied within a radius of 150

km around each plant. This average figure reaches approximately 90 % if the radius

is extended to 250 km.46

(56) Third, customers that responded to the market investigation indicated that 80 % of

their total purchases of grey cement are supplied from a distance of up to 150 km

from their location and 89 % of their total purchases of grey cement are supplied

from a distance of up to 250 km from their location.47

(57) The Commission acknowledges that defining the relevant geographic markets as

radius around a grey cement supplier’s plant may lead to the inclusion of customers

facing differing supply conditions in the same relevant geographic market, in

42


See replies to question 4 - Phase II questionnaire to competitors-cement, replies to question 4 - Phase II

questionnaire to customers-cement (Q6) and replies to question 22 - Phase II questionnaire to

customers-cement (Q7). 44

The Spanish original reads "La repercusión del coste de transporte en el precio de venta del cemento en

destino, es elevada. Por lo que la competencia en cada punto de España depende del número de

productores que puedan acceder a dicho punto con un coste de transporte más o menos semejante". See

reply to question 4 - Phase II questionnaire to competitors-cement. 45




Phase II questionnaire to customers-cement (Q7).

EN 15 EN

particular as far as the number of alternatives available to each customer is

concerned.48

(58) Grouping together only customers facing similar supply conditions would, however,

lead to the definition of many different geographic markets. The Commission

therefore uses the approach of drawing a radius around the Parties' plants which

include the customers for which the respective plant is a potential source of supply.

In any case, the fact that within a given radius customers may face differing supply

conditions will be taken into account in the ensuing competitive assessment.

(59) As regards the calculation of market shares in these radii, the Notifying Party has

estimated the total size of the relevant geographic markets (radii of 150 km around

the Parties' plants in Spain) by adding up the cement consumption in each of the

provinces totally or partially included in a given radius. The reason is that the

historical statistics of sales of cement in Spain (as compiled and published by La

Agrupación de Fabricantes de Cemento de España, the Spanish Cement Producer

Association known as "Oficemen") are broken down per province, and not per infra-

provincial territorial units. Arguably, a fraction of the included province can lie

outside the boundary of the relevant radius. However the analysis by the Commission

of sales data and supply patterns showed that this methodology does not affect the

accuracy and reliability of the market estimates. Moreover it also helps to capture the

cement sales made at more distant locations.

(60) As regards the dimension of the radius to consider, the Commission notes that by

including provinces that are only partially covered by a given radius, the clusters

defined by the Notifying Party based on the 150 km radius include areas that are

located more than 150 km from the cement plant in question. In most cases, this

includes regions located more than 250 km from the plant in question.

(61) Additionally, and given that linear distances represent significantly shorter distances

than by road, the 150 km radius per se already comprises areas located more than

150 km away from a given plant by road distance.

(62) In this respect, an analysis of Cemex's own sales data confirms that the vast majority

of sales are transported over a distance of less than 150 km. In particular, the

distribution of sales by distance shows that overall in Spain more than 80 % of the

volumes sold to third parties are delivered to addresses located less than 150 km

away from the plants where the grey cement was produced.49

A radius of 150 km

appears therefore to reflect the distance up to which cement suppliers typically sell

cement in Spain.

6.2.4. Conclusion on the geographic market definition

(63) For the purpose of the assessment of the proposed transaction, the Commission

considers that the relevant geographic market for grey cement corresponds to clusters

48

Due to transport costs, depending on its location, a cement supplier may be in a better position to make

a competitive offer to certain segments of the cluster (those nearer to its plant) than to other segments

located far away from its plant. As a consequence, the alternatives that a customer has available will

thus differ depending on its geographic location within the cluster. Moreover, since prices are

negotiated individually with customers in the grey cement markets, cement suppliers can enter into

price competition for each individual customer’s business. 49

This figure is about 75 % using Holcim's transaction data. The Commission considers Holcim's data

incomplete for the purpose of this analysis, however as more than 40 % of transactions refer to pick-up

sales where the delivery destination and distance is not recorded. The Commission has therefore been

unable to draw any conclusion from that data.

EN 17 EN

Zaragoza) and one in Lloseta (Balearic Islands). In addition it operates one grinding

mill in Castillejo53

(province of Toledo) and a number of terminals.54

6.3.2. Other suppliers and their production facilities

(68) In addition to the Parties, several competitors are active in the production and supply

of grey cement close to the Parties' production facilities in Spain, in the 150 km

clusters.

(69) In Spain, there are ten integrated cement producers which belong to the Spanish

Cement Producer Association Oficemen. Apart from the Parties, the integrated

players are the following.

(70) Cementos Portland Valderrivas, S.A. ("CPV") is the largest Spanish cement producer

in Spain. It owns seven integrated plants throughout Spain, namely in the provinces

of Sevilla, Madrid, Navarra, Palencia, Cantabria and Barcelona.

(71) Grupo Votorantim ("Votorantim") is a major Brazilian cement group present in

24 countries. Votorantim entered the Spanish market in 2012 by acquiring the

Spanish assets of the Portuguese company Cimpor. It currently owns 4 integrated

cement plants in western Andalusia and the provinces of Leon and Huelva. It also

owns 4 grinding mills.

(72) Lafarge Cementos, S.A. ("Lafarge") is one of the leading manufacturers of grey

cement worldwide with a presence in 64 countries. In Spain, Lafarge owns 3

integrated plants in the provinces of Barcelona, Valencia and Toledo. It also owns 3

grinding mills.

(73) Cementos Tudela Veguín, S.A. ("Tudela Veguín") owns three integrated plants and

one grinding mill in northern Spain.

(74) Sociedad Financiera y Minera, S.A. ("FYM") is the Spanish subsidiary of the Italian

Italcementi group, an international group which is present in 22 countries. In Spain it

owns 3 cement integrated plants in the Basque Country and the province of Malaga.

(75) Cementos Molins Industrial, S.A. ("Molins") owns two integrated plants in the

province of Barcelona.

(76) Cementos Balboa, S.A. ("Balboa") owns an integrated plant in the province of

Badajoz.

(77) CRH plc. ("CRH") is a leading Irish building materials operator active in 35

countries. CRH has recently entered the Spanish market through the acquisition of

Cementos Lemona, S.A., an integrated plant located in the Basque country which

belonged to CPV.

(78) In addition, a number of grinding mills are active in Spain, in particular in eastern

Spain. The main grinding mills are the following.

(79) Cementos La Unión, S.A. ("CLU") belongs to the Cementos La Unión Group and

owns a grinding mill in the province of Valencia.

(80) Cementos La Cruz, S.L. ("CLC") is an independent operator that owns a grinding

mill in the province of Murcia.

53

Castillejo plant is an integrated plant. It currently functions, however, only as a grinding station given

that in 2012 Cemex mothballed the kilns for clinker production. Form CO, Annex 2.2 54

Form CO, Annex 2.2 and Cemex's reply to the Commission's request for information 7 March 2014,

Question 1.

EN 18 EN

(81) Cementval Materiales de Construcción, S.L. ("Cementval") operates a grinding mill

in the province of Valencia. Holcim owns a 20 % stake in Cementval.

(82) Elite Cementos, S.L. ("Elite") operates a grinding mill in the province of Castellon.

Lafarge owns a 35 % stake in Elite.

(83) Cementos Barrero, S.A. ("Barrero") operates a grinding mill in the province of

Sevilla.

(84) Cementos El Molino, S.L. ("El Molino") operates a grinding mill in the province of

Teruel.

(85) Hormigones y Cementos Andaluces, S.L. ("C. Andaluces") operates a grinding mill

in the province of Malaga.

(86) A number of importers are also active in Spain.

(87) Colacem S.p.A. ("Colacem") is an importer which belongs to the Italian Financo

Group, active in the production and sales of cement and concrete. Colacem operates

exclusively in Spain and its only activity is the import of cement from the Financo

Group and its marketing in Spain. Colacem has two terminals, one in the province of

Alicante and one in the province of Murcia.

(88) Ceminter Hispania, S.A. ("Ceminter") is also an importer which operates one

grinding mill in the province of Cadiz. It also operates two terminals, one is located

in the province of Almeria and another is located in the province of Granada.

(89) The locations of cement production facilities in Spain are shown in Figure 1.

Figure 1: Grey cement production facilities. The cement facilities of Cemex are marked

by blue dots while those of Holcim are marked by red dots

Source: Form CO, Annex 6.3.A.

6.4. Market shares and market structure

(90) As shown in Table 3, the Parties’ activities primarily overlap in the clusters located

in the Centre of Spain ("Centre region clusters" around the plants of Yeles and

Castillejo) and those located in the South-Eastern part of the country ("Levante

EN 21 EN

involving the elimination of important competitive constraints that the parties

previously exerted upon each other together with a reduction of competitive pressure

on the remaining competitors may, even where there is little likelihood of

coordination between the members of the oligopoly, also result in a significant

impediment to competition. The Merger Regulation clarifies that all mergers giving

rise to such non-coordinated effects shall also be declared incompatible with the

internal market.63

(93) In evaluating the likelihood of non-coordinated effects potentially caused by a

merger, it is important to assess the extent to which the products sold by one merging

party are close substitutes to the products sold by the other merging party. The

merging firms' incentive to raise prices is more likely to be constrained when rival

firms produce close substitutes to the products of the merging firms than when they

offer less close substitutes.64

(94) The Commission is unlikely to find that the merger will create or strengthen a

dominant position or otherwise significantly impede effective competition when rival

firms have available capacity and find it profitable to expand output sufficiently. In

other words, the extent to which competitors to the merged entity constrain the

merged entity from raising prices not only depends on the level of their spare

capacity but also on whether these firms have the incentive to react aggressively to a

post-merger price increase.65

(95) Furthermore, non-merging firms in a given market can benefit from the reduction of

competitive pressure that can result from a merger, since any price increase by

merging firms may switch some demand to rival firms, which, in turn, may find it

profitable to increase their prices.66


(96) The Notifying Party submits that the proposed transaction will not significantly

impede effective competition in the markets for grey cement within the 150 km

clusters around the Parties' cement production facilities in Spain due to non-

coordinated effects.

(97) First, the Notifying Party submits that the Spanish market is characterised by the

presence of nation-wide players (both Spanish and international), plus a wide array

of regional suppliers. In total, 24 different operators currently manufacture cement in

Spain. The market includes 56 manufacturing facilities, 33 of which are integrated

cement plants and 23 are clinker grinding units. Moreover, the Notifying Party

argues that importers have been traditionally present in the Spanish market.

Switching by customers between those various players is consequently common and

customers are unlikely to lack alternatives as a result of the proposed transaction.67

(98) In this context, the Notifying Party presents an analysis of the structure of each of the

relevant geographic markets.

(99) In the case of the Jerez, Morata and Alcanar clusters, the Notifying Party submits

that the combined market shares are below [20-30]* % and the overlap is minimal.

Therefore, the proposed transaction does not bring any appreciable change in these

63

Horizontal Merger Guidelines, paragraph 25. 64




Form CO, paragraphs 140-148.

EN 22 EN

markets. In the Lloseta cluster the Notifying Party submits that the overlap between

the Parties is very small since Holcim's market share is insignificant.

(100) In the case of the Yeles cluster, the Notifying Party first argues that the combined

market share is below [20-30]* % and Holcim's contribution is moderate (less than

[10-20]* %). Second, the Notifying Party indicates that there are several integrated

players with at least [5-10]* % market share each.

(101) In the case of the Castillejo cluster, the Notifying Party submits that although the

combined market shares are slightly above [20-30]* %, there are a number of

sizeable players which attained market shares of at least [5-10]* %.

(102) In the case of the Levante region clusters, the Notifying Party submits that the

proposed transaction would not afford any market power, despite the combined

market shares being above [30-40]* % or even [40-50]* %. First, the Notifying Party

argues that the merged entity would face a large number of players and

manufacturing facilities. These companies belong to two different categories: (i)

integrated sizeable international players such as Votorantim, Italcementi (which

owns FYM), Lafarge and the Spanish market leader CPV; and (ii) independent

grinding mills, which have lower investment costs when compared to integrated

plants and are typically more flexible and dynamic from a commercial perspective,

such as CLC and CLU, with grinding stations located in Murcia and Valencia

respectively.

(103) In the Reply to the SO, the Notifying Party provided an assessment of the number of

alternatives post-merger68

for Cemex's customers within the Gador-Carboneras and

Alicante clusters. On the basis of transaction data submitted by Cemex for 2013, the

Notifying Party claims that for the majority of customers representing [70-80]* % in

number and approximately [70-80]* % in volume there will be at least three

alternatives to Cemex post-merger in the Gador-Carboneras cluster. The

corresponding figures for the Alicante cluster will be [70-80]* % and [70-80]* %.

(104) Moreover, the Notifying Party submits that the Levante region clusters are located in

a region where significant imports of grey cement have taken place in the past

(225 000 tonnes in 2011 which equates to more than half of the total volume

imported into Spain). Although these imports have declined since 2007, this is due to

the rapid collapse of the construction market, which had a downward effect on prices

charged by Spanish cement producers as well. There is a positive correlation between

prices charged by Cemex between 2005 and 2010 and the level of imports in

Levante. Should prices increase again in Levante post-transaction, this would

immediately attract imports of both grey cement and clinker, as has happened in the

past when demand and price levels were higher.69

(105) Second, the Notifying Party submits that Cemex and Holcim are not each other’s

closest competitor in any of the Levante region clusters. In a market where

competition is driven by transportation costs and where cement players have a

natural economic incentive to concentrate their sales in the provinces close to their

plants, Cemex and Holcim cannot be considered as close competitors since the

location of their plants is largely complementary. Holcim’s cement facilities are

located in Almeria, Cadiz and Toledo, while Cemex's cement plants are located in

the provinces of Zaragoza, Tarragona, Alicante, Valencia and Toledo, and the island

68

Reply to the SO, Annex 1 "An economic assessment of the SO", Tables 8 and 9. 69

Form CO, paragraph 156-160.

EN 23 EN

of Mallorca. Therefore, the Parties’ facilities are only physically close to each other

in one Spanish province (Toledo).70

(106) It is further submitted that the geographic footprint of the two operators is also "very

different" in these three clusters.71

Holcim’s cement facilities are located in

Andalusia (two plants in the province of Almeria and one plant in the province of

Cadiz) whereas Cemex’s plants are located in the provinces of Alicante and

Valencia. This difference in location is reflected in the sales of Holcim and Cemex,

which are concentrated in different areas.72

For example, while most of Holcim’s

volume of sales to third parties in 2012 was to customers located in Almeria and

Murcia ([70-80]* %), Cemex’s sales to third parties were more concentrated in

Alicante and Valencia, which represented [50-60]* % of its sales volume. The

differences would also be apparent in terms of revenue.

(107) With a view to assessing the closeness of competition between the Parties and their

competitors in the Levante region clusters, the Notifying Party has provided win/loss

data between Cemex and its main competitors (including Holcim). This data reports

the proportion of volumes lost or won by Cemex to each of its main competitors in

the Levante region clusters in 2011 and 2012, as collected through Cemex's market

intelligence.73

According to the Notifying Party, CLC, Lafarge, and Colacem were

the competitors with which Cemex had most interaction in 2011.74

As regards 2012,

the Notifying Party claims that Colacem, CLC, CLU and Lafarge were much more

relevant competitors for Cemex than Holcim in these clusters.75

The picture is similar

regardless of whether the assessment is carried out in the clusters around the Gador-

Carboneras, Alicante and Buñol plants.76

(108) Regarding closeness of competition, the Notifying Party also notes that Cemex and

Holcim have a very different structure in the Spanish market. Cemex is a larger

player, both in terms of number of facilities, capacity installed and volume of cement

produced. Their respective degree of vertical integration is also different, since

Holcim has a comparatively higher presence in the downstream RMX and aggregates

market despite having a significantly smaller position in the upstream cement

market.77

(109) Third, in addition to the high number of operators, the most salient feature of the

current grey cement market in Spain is its high overcapacity, as a direct consequence

of the crash of the construction and property markets in Spain since 2007. Cement

manufacturers in Spain therefore have an incentive to expand output in order to

70

Form CO, paragraphs 180-184. 71

Reply to the Article 6(1)(c) decision, paragraph 68. 72

Reply to the Article 6(1)(c) decision, Annex 3 "Unilateral effects in Levante: economic assessment",

paragraph 23. 73

The Commission notes that the analysis undertaken by the Notifying Party is based on win/loss data

which has limited evidentiary value, as it is not systematically compiled by Cemex through its market

intelligence. As acknowledged by Cemex, "the information on lost and won customers is not

systematically registered in Cemex's systems […] this information is not complete at all […] the

reliability of this information is highly questionable". 74

The proportion of volumes lost to or won from Holcim in 2011 represented only [0-5]* % of the total

volumes lost or won by Cemex in 2011 in each of the Levante region clusters. 75

The proportion of volumes lost to or won from Holcim in 2012 represented only [5-10]* % of the total

volumes lost or won by Cemex in 2012 in each of the Levante region clusters. 76

Reply to the Article 6(1)(c) decision, Annex 3 "Unilateral effects in Levante: economic assessment",

paragraph 30. 77


EN 24 EN

reduce unitary costs, which would counteract any attempts by the merged entity to

reduce output or increase prices. This is evidenced by the current available capacities

of the Parties’ plants in Spain with clinker capacity utilisation varying between [20-

30]* % (Jerez) and [60-70]* % (Carboneras) and grey cement capacity utilisation

varying between [10-20]* % (Buñol) and [50-60]* % (Lloseta).78

(110) Overall, according to one of the Parties' economic studies79

, the Parties have not been

pivotal80

(individually or collectively) pre-merger and will not become so post-

merger. Cement consumption would need to more than double in the Gador-

Carboneras cluster and more than triple in the Alicante cluster for the Parties to

become pivotal post-merger. In the context of such levels of excess capacity, if

Cemex attempted to increase prices post-merger, competitors would have the ability

to expand output and render such a price increase unprofitable.

(111) According to the Notifying Party, with an overcapacity of 74 %, Spanish cement

manufacturers have the strongest and most direct incentive to expand output in order

to reduce unitary costs. Any strategy by the merged entity to reduce production and

increase prices would be counteracted by an immediate increase in output by its

many competitors wishing to win demand and improve their poor utilization rate.

This would exclude upfront any hypothetical exercise of market power by the

merged entity post-transaction.81

(112) Fourth, the Spanish cement market is reasonably open with surmountable barriers to

entry. No significant customs tariffs are imposed by the EU on imported cement or

clinker and the construction of a grinding mill requires a much lower investment than

a full integrated cement plant.82

(113) Regarding in particular the investment costs to set up an integrated plant, no

technical or commercial barriers exist, since no intellectual property rights apply to

the cement industry and the investment in distribution networks and brand building is

not relevant. Moreover, there is no scarcity of raw materials or qualified personnel to

enter these markets and newcomers like Votorantim or CRH have shown that entry is

not difficult.83

6.5.3. The Commission's assessment

(114) For the reasons set out in this section the proposed transaction would not

significantly impede effective competition in the markets for grey cement within the

150 km clusters around the Parties' plants due to non-coordinated effects.

6.5.3.1. Assessment of the Levante region clusters

(115) The Commission has analysed (i) market shares and market structure, (ii) closeness

of competition between the Parties and (iii) the ability and incentives of competitors

to increase supply if the merged entity were to increase prices in the Levante region

clusters.

78


Reply to the SO, Annex 1 "An economic assessment of the SO", para. 44. 80

A firm is non-pivotal if, in case this firm were to withdraw all of its capacity from the market, rivals

would have enough capacity to cover the entire market demand. 81


The Notifying Party considers that an investment of at least EUR […] million would be required to

achieve a production capacity of 2 million tonnes per year. Also according to the Notifying Party, a

grinding unit with production capacity of 500 000 tonnes per year would require an investment between

EUR […]. Form CO, paragraph 396. 83

Form CO, paragraph 236 (c).

EN 26 EN

sales (0-5 %) in this cluster. Also Cementval (grinding mill in the province of

Valencia) had marginal sales (0-5 %) in the Alicante cluster.

(124) In the Buñol cluster, the Parties' share has been in decline since 2011, reaching [20-

30]* % in 2013, with an overlap of [10-20]* %.

(125) The competitive landscape in the Buñol cluster was similar to that prevailing in the

Alicante cluster. In terms of market share, the Parties' nearest competitors were CLU

([10-20]* %) and CLC ([10-20]* %). The grinding mills were followed by the

integrated player Lafarge (5-10 %) and the grinding mill Cementval (5-10 %). Other

integrated players such as CPV, Votorantim and Balboa have no plants in the Buñol

cluster and achieved limited sales (0-5 %) in this cluster.

(126) It can be concluded from the above that the Levante region clusters are characterised

by a significant number of players. On average, and although not all players have the

same strength and geographic footprint, between 12 and 14 cement producers are

active in the Levante region clusters, including both integrated and non-integrated

(grinding mills) players. Moreover, Votorantim has acquired a majority stake in a

grinding mill in the province of Malaga (Cementos Antequera) in May 2013 which is

likely to enable Votorantim to develop and increase its market presence in the Gador-

Carboneras cluster.84

(127) Moreover, the majority of competitors and customers that responded to the market

investigation indicated that a number of grey cement suppliers compete in the

Levante region clusters.

(128) In this respect, one cement competitor explained that "there is such a high cement

offer for such a low demand in this area that it will not be very relevant whether both

companies or only one of them operates there because, considering both grinding

mills and integrated players, there are seven or eight competitors in the area".85

(129) A cement customer active in Murcia and other regions of Spain stated that "in the

markets where our company operates (RMX and aggregates) a risk of concentration

of cement offer due to this operation is not expected" and in the Levante region

clusters in particular it considers that "a high overcapacity will remain and therefore

cement customers will have at least 3 or 4 alternative suppliers".86

(130) Another customer active in Castellon, Valencia and Malaga mentioned that the

proposed transaction will not have any impact on its company and "the market will

not shrink because there are enough cement suppliers".87

84

See http://www.diariosur.es/v/20130522/malaga/multinacional-brasilena-votorantim-compra-

20130522 html. In this article Votorantim explains that the company brings clinker from Cordoba and

process it in this plant and that the main target of the cement produced in this grinding mill remains

Malaga and neighbouring provinces, such as Granada. 85

The Spanish original reads: "Hay tanta oferta y tan poca demanda en la región (Levante) que no tendrá

demasiada relevancia que opere una sola de estas empresas o las dos, porque entre fabricantes

integrados y moliendas existen entre siete y ocho competidores.". Agreed minutes of the call with a

competitor, 4 June 2014. 86

The Spanish original reads: "En los mercados en los que opera nuestra empresa (hormigón y áridos) no

se anticipa riesgo de concentración de oferta de cemento en base a esta operación (…) seguirá

existiendo un exceso de capacidad de producción muy elevado en este mercado, haciendo que los

consumidores de cemento seguirán contando por lo menos con 3 o 4 alternativas de suministro". See

reply to question 32 and 35 - Phase II questionnaire to customers-cement. 87

The Spanish original reads: "Existen suficientes operadores para que no se contraiga el mercado". See

reply to question 32 and 35- Phase II questionnaire to customers-cement.

EN 27 EN

(131) It also appears that the intensity of competition between cement players has

increased during 2013 in the Levante region clusters. Cement customers responding

to the market investigation have explained for example that "the cement price has

decreased considerably in 2013 in comparison to the market prices during previous

years due to the low demand of cement and the high competition"88

, that 2013 was

characterized by "an aggressive lowering of prices" 89

or that "all [cement suppliers]

have experienced a sharp decline in prices"90

.

(132) Finally, within the Gador-Carboneras and Alicante clusters, where the Parties'

combined market share in 2013 exceeded [30-40]* %, the Commission also assessed

the number of alternative suppliers post-merger for Cemex's customers. For the

majority of customers representing [70-80]* % in number and approximately [60-

70]* % in volume there will still be at least three alternatives to Cemex post-merger

in the Gador-Carboneras cluster. The corresponding figures for the Alicante cluster

will be [70-80]* % and [60-70]* %.91

(b) Closeness of competition

(133) Products may be differentiated within a relevant market such that some products are

closer substitutes than others. The higher the degree of substitutability between the

merging firms' products, the more likely it is that the merging firms will raise prices

significantly. For example, a merger between two producers offering products which

a substantial number of customers regard as their first and second choices could

generate a significant price increase. Thus, the fact that rivalry between the parties

has been an important source of competition on the market may be a central factor in

the analysis. High pre-merger margins may also make significant price increases

more likely. The merging firms' incentive to raise prices is more likely to be

constrained when rival firms produce close substitutes to the products of the merging

firms than when they offer less close substitutes. It is therefore less likely that a

merger will significantly impede effective competition, in particular through the

creation or strengthening of a dominant position, when there is a high degree of

substitutability between the products of the merging firms and those supplied by rival

producers.92

(134) Cement is a relatively homogenous product with high transportation costs. In the

cement industry, distance between the supplier and the customer can affect the

latter's decision to source from one supplier or the other. If the Parties have a very

different geographic footprint, customers will not consider them as the closest

alternatives. Therefore, the distance from the customer to a supplier is a

differentiating factor in this market.

(135) For the reasons set out in the reminder of this section, the Commission has concluded

that a price increase by the merged entity post-merger would not be profitable since,

88

The Spanish original reads: "Se ha bajado el precio del cemento considerablemente con respecto a los

precios de otros años, creemos que influye la poca demanda de este y la alta competencia que existe".

See reply to question 31.4 - Phase II questionnaire to customers-cement. 89

The Spanish original reads: "Bajada de precios agresivos". See reply to question 31.4 - Phase II

questionnaire to customers-cement. 90

The Spanish original reads: "Todos han realizado una gran bajada de precios". See reply to question

31.4 - Phase II questionnaire to customers-cement. 91

Based on 2012 transaction data by Cemex. Only deliveries to third party customers have been included

in this analysis. 92

Horizontal Merger Guidelines, paragraph 28.

EN 28 EN

apart from Holcim, there are several other close competitors to Cemex in the Levante

region clusters.

(136) First, in the Levante region clusters, the Parties have a relatively different geographic

footprint in terms of integrated plants (Cemex in Valencia and Alicante, and Holcim

in Almeria). However, this difference is mitigated by the operating of silos or

terminals in the areas where the Parties are not present, therefore increasing the

Parties' footprint overlap. Cemex and Holcim operate three terminals in Castellon,

Valencia and Motril (province of Granada), and Valencia, Cartagena (province of

Murcia) and Motril93

(province of Granada) respectively. The analysis of 2013 sales

data indicates that Holcim achieved [90-100]* % of its sales in the Alicante province

from its terminal in Cartagena, located 120 km away from Alicante. The Cartagena

terminal is the closest access gate to the markets located to the north of Gador and

Carboneras. The Cartagena terminal is also widely used for deliveries in the province

of Murcia: [40-50]* % of sales in this province pass through this terminal with [50-

60]* % being provided directly from the plants. The same is true for Albacete, where

[70-80]* % of sales in this province pass through this terminal with [20-30]* %

being provided directly from the plants. Likewise, [90-100]* % of Holcim's sales in

the province of Valencia originated from Holcim's silo in Valencia.

(137) Second, there are several competitors that can be considered as equally close or even

closer alternatives for Holcim's customers than Cemex. Likewise, some Levante

clusters' rivals can be considered as close or equally close alternatives for Cemex's

customers than Holcim. The following elements are relevant in that respect.

(138) In the first place, in the Alicante and Gador-Carboneras clusters in 2013, where the

Parties' combined market share in 2013 was above [30-40]* %, the Notifying Party

has carried out an analysis94

in which it presents (i) the closest alternative supplier

and (ii) the first and second closest alternative suppliers for Cemex's customers. The

Commission has verified the data provided by the Notifying Party and considers that

these elements are correct.

(139) In the Alicante cluster, the analysis indicates that Holcim is the closest alternative

supplier for [20-30]* % in number ([20-30]* % in volume) of Cemex's customers.

The corresponding figure for [competitor 1] is higher ([20-30]* % in number and

[20-30]* % in volume), followed by [competitor 2] and [competitor 3] that are the

closest alternative suppliers for [10-20]* % and [10-20]* % in number of Cemex's

customers in the Alicante cluster respectively ([10-20]* % and [10-20]* % in volume

respectively). Holcim is the closest or second closest alternative for [50-60]* % in

number ([50-60]* % in volume) of Cemex's customers in the Alicante cluster,

whereas [competitor 1], [competitor 3] and [competitor 2] are the closest or second

closest for [40-50]* %, [30-40]* % and [30-40]* % in number of Cemex's customers

respectively ([30-40]* %, [30-40]* % and [20-30]* % in volume respectively). Even

if Holcim figures are higher than their competitors, for those customers for which

Holcim is the closest or second closest alternative, the additional distance for

reaching the alternative supplier is relatively short (it varies on average between 3

and 30 km).

(140) In the Gador-Carboneras cluster, the analysis indicates that Holcim is the closest

alternative supplier for [10-20]* % in number ([10-20]* % in volume) of Cemex's

customers. This figure is exceeded by both [competitor 1] and [competitor 3] that are

93

[…]. 94

Reply to the SO, Annex 1 "An economic assessment of the SO".

EN 29 EN

the closest alternative supplier for [40-50]* % and [20-30]* % in number of Cemex's

customers in the Gador-Carboneras cluster respectively ([30-40]* % and [20-30]* %

in volume respectively). Also in terms of the number of Cemex's customers for

which a competitor is either the closest or the second closest alternative supplier,

[competitor 1] and [competitor 3] exceed Holcim's figures. Holcim is the closest or

second closest alternative for [40-50]* % in number ([40-50]* % in volume) of

Cemex's customers in the Gador-Carboneras cluster, whereas [competitor 1] and

[competitor 3] are both the closest or second closest for [50-60]* % in number of the

customers ([50-60]* % and [50-60]* % in volume respectively).95

(141) In the second place, the Notifying Party has provided extracts of Cemex's weekly

commercial reports showing constant and frequent commercial initiatives conducted

by rival firms (among them CLC, CLU, Colacem, Lafarge, CPV and Cementval) vis-

à-vis Cemex's customers between July 2013 and April 2014. 96

(142) Third, the Notifying Party submitted an analysis97

of the volumes relating to

customers that multi-sourced from both Parties in 2012.98

An analysis of multi-

sourcing of customers constitutes a useful indication of customers that consider the

Parties as close substitutes and who would therefore lose a relevant supplier as a

result of the proposed transaction. The results suggest that in 2012 the volume that

the customers that purchased from both Cemex and Holcim in the Gador-Carboneras

cluster represents on Cemex's sales is approximately [10-20]* % and on Holcim's

sales is [5-10]* %. In the Alicante cluster the corresponding figures are [10-20]* %

with respect to Cemex's sales and [10-20]* % with respect to Holcim's sales.99

(143) Fourth, there are no elements in the file (market investigation, internal documents)

indicating that the Parties are closer competitors to each other than to other

competitors such as Colacem, CLC and CLU in the Levante region clusters.

(c) Ability and incentives of competitors to increase supply if the merged entity

were to increase prices

(144) For the reasons set out in recitals (145) to (154), the Commission considers that

competitors, in particular grinding mills, will have the ability and incentives to

increase supply if the merged entity were to increase prices in the Levante region

clusters. First, grinding mills will have the possibility to source clinker from

alternative sources, and in particular from overseas, should they wish to expand

cement output and compete against the merged entity post-transaction. Second, post-

95

Reply to the SO, Annex 1 "An economic assessment of the SO", tables 8-11 and supporting data as

provided by the Notifying Party. 96

Due to Cemex's Information Retention Policy, documents sent by e-mail such as these commercial

weekly reports are not stored longer than 60 days. 97

Reply to the SO, Annex 1 "An economic assessment of the SO", para. 27-28 98

On 23 May 2014, the Notifying Party provided an analysis of the competitors that Cemex lost

customers to, or won customers from, in 2011 and 2012 in the Levante region clusters. According to

this data, in these clusters, Cemex lost or gained more customers to Colacem, La Cruz and La Unión as

opposed to Holcim in 2012. According to the Notifying Party, these switching patterns support the view

that Holcim is not Cemex’s closest competitor in the Levante region clusters. The Commission notes

that the analysis undertaken by the Notifying Party is based on win/loss data which has limited

evidentiary value, as it is not systematically compiled by Cemex through its market intelligence. As

acknowledged by Cemex, "the information on lost and won customers is not systematically registered

in Cemex's systems […] this information is not complete at all […] the reliability of this information is

highly questionable". 99

These figures correspond to delivered transactions only due to the impossibility to identify the

provinces of delivery for Holcim pick-up sales.

EN 30 EN

merger, the capacity of competitors, including grinding mills, will remain

significantly above total market demand, with the result that any increase in price by

the merged entity is likely to be counteracted by an increase in output by

competitors.

(i) Grinding mills will have the possibility to source clinker from alternative

sources

(145) As previously described in recitals (122) to (126), the Parties' competitors in the

Levante region clusters are (i) integrated plants and (ii) grinding mills. Integrated

plants produce their own raw material (clinker) while grinding mills have to source it

externally, normally from integrated players. Therefore, the key determinant of the

ability of grinding mills to expand cement output is the availability of clinker.

(146) The Commission has concluded that grinding mills in the Levante region clusters are

not dependent on the sourcing of domestic clinker from the Parties for their

production of grey cement. This is because the evidence suggests that grinding mills

can resort to imported clinker whenever they deem it appropriate, with little apparent

difficulty or additional cost. The availability of imports as a viable alternative for

grinding mills to source clinker implies that the Parties will not have the ability, post-

merger, to limit the availability, or increase the price, of clinker.

(147) First, historically (2007-2009), all the grinding mills in Spain sourced the vast

majority (close to 100 %) of their clinker needs from abroad (mainly China,

Thailand, Turkey and Egypt). Spain was the principal importer of clinker in Europe.

For example, in 2008, Spain's share of cement imports into Western Europe was

16 %, while its share of clinker imports was 66 %.100

In 2007 cement production

reached 55 million tonnes with clinker production of 32 million tonnes. That

difference was compensated by imports of clinker, notably by grinding mills, to

satisfy the pre-crisis cement demand.

(148) From 2008 onwards, cement and clinker production in Spain started to decline in line

with the drop in demand (cement production fell from 42 million tonnes in 2008 to

22 million tonnes in 2011). Clinker imports declined from 5.4 million tonnes in 2008

to 0.5 million tonnes in 2011 whereas at the same time clinker exports started to

increase (from zero in 2007 up to 1.6 million tonnes in 2011). Cement imports

followed the same trend, from 3.1 million tonnes in 2006 to 0.4 million tonnes in

2012. As regards more specifically the Levante region clusters, clinker imports have

considerably decreased in recent years from approximately one million tonnes in

2009 to practically zero in 2012. This drop in imports can be explained by the fact

that the demand for clinker has been met from 2010 onwards domestically by

integrated players located in Spain. As explained by a grinding mill, the contracts for

the national supply of clinker are normally negotiated on a yearly basis so that the

national price for clinker set by integrated producers in Spain always remains below

the import price.101

Imports of clinker have slightly recovered in 2013 (60 000

tonnes).

100

See "Outlook on the global cement and clinker trade" available at

http://www.asocem.org.pe/bivi/dsi/Diseminacion_industria/Outlook%20on%20the%20global%20ceme

nt%20and%20clinker%20trade.pdf. 101

The Spanish original reads: "En cuanto a los contratos de suministro de clinker, (…) señala que se

firman para un año y que se renegocian a finales de éste de forma que los precios nacionales siempre

están por debajo de los precios de importación". Agreed minutes of the call with a competitor, 10 June

2014.

EN 31 EN

(149) Second, although imports are slightly more costly than domestic sourcing, and more

challenging from a logistical perspective, the main grinding mills active in the

Levante region clusters that responded to the market investigation indicated that they

have resumed imports of clinker in 2013. For example, CLC, which did not import

clinker in 2012, has imported in 2013 one third of its needs from Turkey. CLU has

been importing the majority of its clinker needs in 2014 to date and Elite has sourced

around 12 % of its requirements from Egypt in 2013.

(150) In particular CLC explains that "we have only sourced national clinker from Holcim

and Cemex and we would not have any problem in sourcing clinker if these two

providers were to disappear. CLC would in that case go back to clinker imports

(from Eastern countries and China). Moreover, CLC wants to freely choose its

clinker supplier and not to depend on an exclusive one.102

" CLC adds that "the

reason why we have changed sourcing from Cemex to Turkey in 2013 is because we

are not bound by any exclusive purchasing clause and we have always combined the

sources of clinker in our own interest and that our strategy is to constantly seek for

the best commercial conditions and clinker quality both among Spanish producers

and producers in the rest of the world".103

(151) In addition, CLU explains that "if the negotiations to import clinker are carried out

in advance and for annual contracts (around 300 000 tonnes) it is possible to obtain

prices and quality similar to those offered by Cemex. CLU has imported clinker

during many years, because national producers did not sell clinker to grinding mills

in the past, and therefore knows very well the clinker import market".104

(152) Other grinding mills have confirmed that they would turn to clinker imports should

the national clinker price become higher than the imported one. As explained by a

grinding mill "the last year that we imported clinker was 2009. The reason we

stopped importing was the possibility to buy it slightly cheaper in the national market

(…) We will go back to clinker imports whenever the national clinker becomes more

expensive than the imported one"105

. Another grinding mill added that "currently it is

more convenient to buy clinker nationally but if the price were to increase we would

102

The Spanish original reads: "La Cruz indica que, aparte de Cemex y Holcim, no ha tenido más

proveedores nacionales y señala que la empresa no tendría problemas en abastecerse de clinker si

estos dos proveedores desapareciesen, porque volverían a acudir al mercado exterior para importarlo

(países del Este y China).". Agreed minutes of the call with a competitor, 21 March 2014. 103

The Spanish original reads: "De Cemex a clinker de Turquía, en el año 2013, como en ocasiones

anteriores y el motivo del cambio es por no estar obligados a exclusividad de compra y siempre hemos

compatibilizado los suministros a conveniencia (…) Nuestra estrategia es la búsqueda continuada

tanto entre los productores españoles como entre los productores del resto del mundo de las mejores

condiciones de compra en base a la exigencia de calidad del clinker a adquirir. Así ha sido desde

siempre y así seguirá siendo en el futuro." See reply to question 12.1 and 17 - Phase II questionnaire to

competitors-cement. 104

The Spanish original reads: "CLU indica que si las negociaciones para importar clinker se llevan a

cabo con antelación y con contratos anuales (alrededor de 300 000 toneladas) es posible conseguir

precios y calidad similares a las ofrecidas por Cemex. CLU ha importado durante muchos años porque

los productores locales no les vendían clinker y conoce muy bien el mercado de importación de

clinker". Agreed minutes of the call with a competitor, 19 June 2014. 105

The Spanish original reads: "El último año que compramos clinker de importación fue en 2.009. El

motivo para dejar de importar fue el hecho de poder adquirirlo algo más barato en el mercado

nacional (…) Volveremos a importar clinker en el momento en el que nos cueste más el clinker

nacional que el de importación." See reply to question 11.1 and 13.2 - Phase II questionnaire to

competitors-cement.

EN 32 EN

have to import it"106

. Two other grinding mills expressed the view that "it is possible

to import as long as the price is competitive"107

"[changing from national clinker to

imports] and "would depend on the commercial conditions"108

.

(ii) The level of spare capacity held by the Parties' competitors

(153) The Commission has concluded that the level of spare capacity held by the Parties'

competitors in the Levante region clusters is sufficient to give them the ability to

make any increase in prices by the merged entity unprofitable. The Parties are

therefore not pivotal, either individually and collectively, both pre- and post-merger.

(154) This is because, if post-merger, the Parties were to withdraw all their capacity from

the Alicante, Gador-Carboneras and Buñol clusters, competitors would have enough

capacity to cover the entire market demand.109

As regards the Gador-Carboneras

cluster, the total capacity of competitors in the cluster is estimated to be 2.3 times the

total current demand in the cluster.110

This means that even if the Parties were to

reduce output so as withdraw all their capacity, competitors would have the ability to

cover the entire market demand. As regards the Alicante cluster, the total capacity of

competitors in the cluster is estimated to be 2.7 times the total current demand in the

cluster,111

whereas the corresponding figure for the Buñol cluster is 1.7.112

(d) Conclusion

(155) For the reasons set out in recitals (115) to (154), the Commission has concluded that

the proposed transaction would not significantly impede effective competition in the

106

The Spanish original reads: "Actualmente por precio es más conveniente en España, si suben el precio

habria que importarlo." See reply to question 13.2 - Phase II questionnaire to competitors-cement. 107

The Spanish original reads: "(…) cabe la posibilidad si hay precio competitivo". See reply to question

13.2 - Phase II questionnaire to competitors-cement. 108

The Spanish original reads: "(…) depende de las condiciones de compra". See reply to question 13.2 -

Phase II questionnaire to competitors-cement. 109

In order to conduct such an assessment, the Commission has estimated the total capacity available to the

Parties' main rivals in each of the Levante region clusters by looking at the total capacity available at

the rivals' plants which are located in those clusters. The rivals plants' located in the Gador-Carboneras

cluster are those of Votorantim (Bobadilla), Italcementi (Malaga), Hormigones y Cementos Andaluces

(Malaga). The rivals' plants located in the Alicante and Buñol clusters are those of Lafarge (Sagunto),

La Union (Valencia) and Cementval (Valencia). For each of the rivals' plants located in each of the

Levante region clusters, the effective capacity attributable to the cluster has been estimated as the

difference between the total capacity of the plant and the total volume that the plant sells outside the

cluster. These sales represent a part of the capacity which is already "taken" by customers that are

located outside the relevant cluster and is therefore not relevant for the assessment of the available

capacity in the cluster. The effective capacity of the plants achieving positive sales in more than one

cluster has been split according to the current sales split of those plants into those clusters. The capacity

of competitors located outside the Levante region clusters but which currently have sales into the

Levante region clusters (e.g. El Molino, Elite etc) has not been taken into account. This can be

considered conservative in this case, as accounting for this additional capacity would further increase

the level of available spare capacity for rivals in the clusters. The total consumption of cement in a

cluster has been estimated based on data from Oficemen on total sales of cement by province. Oficemen

provided the sales of each of its members by province and also provided an estimate of the total sales of

non-members by province. The consumption relating to provinces belonging to more than one cluster

(e.g. the province of Almeria belonging to Gador and Alicante) has been apportioned across the relevant

clusters, in order to avoid double counting. 110

The total consumption in this cluster is 1 084 000 tonnes and the total available capacity of competitors

is 2 526 000 tonnes. 111

The total consumption in this cluster is 739 000 tonnes and the total available capacity of competitors is

2 023 000 tonnes. 112

The total consumption in this cluster is 1 034 000 tonnes and the total available capacity of competitors

is 1 736 000 tonnes.

EN 36 EN

that previously were not coordinating their behaviour, are now significantly more

likely to coordinate and raise prices or otherwise harm effective competition. A

merger may also make coordination easier, more stable or more effective for firms

which were coordinating prior to the merger (coordinated effects).118

(172) In some markets the structure may be such that firms would consider it possible,

economically rational, and hence preferable, to adopt on a sustainable basis a course

of action on the market aimed at selling at increased prices through a coordination of

their behaviour.119

Coordination may take various forms, such as setting prices above

the competitive level, limiting production or capacity, or dividing the market, for

instance by geographic area or other customer characteristics, or by allocating

contracts in bidding markets.120

(173) Coordination is more likely to emerge in markets where it is relatively simple to

reach a common understanding on the terms of coordination. In addition, three

conditions are necessary for coordination to be sustainable. First, the coordinating

firms must be able to monitor to a sufficient degree whether the terms of

coordination are being adhered to. Second, discipline requires that there is some form

of credible deterrence mechanism that can be activated if deviation from

coordination is detected. Third, the reactions of outsiders, such as current and future

competitors not participating in the coordination, as well as customers, should not be

able to jeopardise the results expected from the coordination.121

According to the

case law, in applying those criteria, it is necessary to avoid a mechanical approach

involving the separate verification of each of those criteria taken in isolation, while

taking no account of the overall economic mechanism of a hypothetical tacit

coordination.122

(174) For competitors to reach a common perception as to how the coordination should

work coordinating firms should have similar views regarding which actions would be

considered to be in accordance with the aligned behaviour and which actions would

not.123

In particular, coordination by way of market division will be easier if

customers have simple characteristics that allow the coordinating firms to readily

allocate them. Such characteristics may be based on geography, on customer type or

simply on the existence of customers that typically buy from one specific firm.

Coordination by way of market division may be relatively straightforward if it is easy

to identify each customer's supplier and the coordination device is the allocation of

existing customers to their incumbent supplier.124

(175) Publicly available key information, exchange of information through trade

associations, or information received through cross-shareholdings or participation in

joint ventures may also help firms reach terms of coordination.125

118




Case T-342/99 Airtours v Commission, ECLI:EU:T:2002:146, paragraph 62 ; Case C-413/06 P

Bertelsmann and Sony Corporation of America v Impala, ECLI:EU:C:2008:392, paragraph 123;


Case C-413/06 P Bertelsmann and Sony Corporation of America v Impala, ECLI:EU:C:2008:392,

paragraph 125. 123




EN 37 EN

(176) Firms may find it easier to reach a common understanding on the terms of

coordination if they are relatively symmetric, especially in terms of cost structures,

market shares, capacity levels and levels of vertical integration. Structural links such

as cross-shareholdings or participation in joint ventures may also help in aligning

incentives among the coordinating firms.126

(177) Coordinating firms are often tempted to increase their share of the market by

deviating from the terms of coordination, for instance by lowering prices, offering

secret discounts, increasing product quality or capacity or trying to win new

customers. Only the credible threat of timely and sufficient retaliation keeps firms

from deviating. Markets therefore require sufficient transparency to allow the

coordinating firms to monitor to a sufficient degree whether other firms are

deviating, and thus know when to retaliate. Transparency in the market is often

higher, the lower the number of active participants in the market. Further, the degree

of transparency often depends on how market transactions take place in a particular

market.127

(178) In some markets where the general conditions may seem to make monitoring of

deviations from coordination difficult, firms may nevertheless engage in practices

which have the effect of easing the monitoring task, even when these practices are

not necessarily entered into for such purposes. These practices, such as meeting-

competition or most-favoured-customer clauses, voluntary publication of

information, announcements, or exchange of information through trade associations,

may increase transparency or help competitors interpret the choices made. Cross-

directorships, participation in joint ventures and similar arrangements may also make

monitoring easier.128

(179) The possibility of retaliation is important for the stability of coordination.

Coordination is not sustainable unless the consequences of deviation are sufficiently

severe to convince coordinating firms that it is in their best interest to adhere to the

terms of coordination. It is thus the threat of future retaliation that can keep the

coordination sustainable. However the threat is only credible if, where deviation by

one of the firms is detected, there is sufficient certainty that some deterrence

mechanism will be activated.129

(180) Retaliation need not necessarily take place in the same market as the deviation. If the

coordinating firms have commercial interaction in other markets, these may offer

various methods of retaliation.130

(181) As regards the specific effects of a merger, a merger may increase the likelihood that

firms are able to coordinate their behaviour and raise prices, even without entering

into an agreement or resorting to a concerted practice within the meaning of Article

101 TFEU. A merger may also make coordination easier, more stable or more

effective for firms that were already coordinating before the merger, either by

making the coordination more robust or by permitting firms to coordinate on even

higher prices,131

for example by facilitating the detection of deviation, limiting the

126


Horizontal Merger Guidelines, paragraphs 49 and 50. 128




Case C-413/06 P Bertelsmann and Sony Corporation of America v Impala, ECLI:EU:C:2008:392,

paragraph 122; Horizontal Merger Guidelines, paragraph 39.

EN 38 EN

ability and incentives of some market players to deviate and allowing more efficient

retaliation.132

(182) After summarizing the Notifying Party's arguments (section 6.6.2), the Commission

will assess whether the proposed transaction would significantly impede effective

competition in the Centre region clusters by making pre-existing coordination easier,

more stable or more effective (section 6.6.3.1) or by making coordination

significantly more likely (section 6.6.3.2).


(183) The Notifying Party argues that the proposed transaction will not significantly

impede effective competition with respect to grey cement in Spain as a whole, as

well as more specifically in the Centre region clusters.

(184) Regarding Spain in general, the Notifying Party put forward the following reasons.133

(185) First, there is no likelihood of coordination given that the grey cement market is open

and competitive. In each of the clusters around the Parties' plants in Spain, at least six

rivals will remain active post-transaction, plus an undetermined number of importers.

Spanish cement manufacturers are also profoundly asymmetric and heterogeneous

(for example national versus international producers, producers with integrated

plants versus grinding stations, newcomers versus traditional producers). In addition,

given the unstable economic environment (with a sharp decrease in demand for grey

cement), it would be difficult for firms to reach a common understanding on the

terms of coordination.

(186) Second, monitoring is difficult given that prices for grey cement are subject to

confidential negotiations with customers on a case-by-case basis and are not

published or otherwise publicly available per company or region.

(187) Third, there is limited possibility for retaliation. Given the fall in demand and the

resulting excess capacity, if one coordinating cement producer were to try to reduce

its prices in order to attract customers of other coordinating firms, it would not be

able in the short-term to subsequently re-increase prices, since customers (both

existing and new) would simply request that the reduced prices be maintained over

time or would otherwise switch suppliers and ask quotations to match the newly

reduced price. Moreover, Spanish cement producers have few structural links

between each other which could provide additional retaliation mechanisms.

(188) Fourth, regarding competitors' reactions and in view of excess of capacity, any

cement producer has a compelling and direct incentive not to raise prices in order not

to lose customers. Moreover, customers regularly switch cement suppliers and hence

can simply ask other manufacturers to undercut the hypothetically coordinated price.

There is a number of grinding mills which are also independent from the integrated

producers. Moreover, a price rise (due to coordinated strategies) could attract imports

of both grey cement and clinker.

(189) Regarding the Centre region clusters, the Notifying Party puts forward the following

arguments.134

(190) In the first place, the Notifying Party submits that apart from Cemex and Holcim,

three integrated competitors (CPV, Lafarge and Balboa) have sizeable sales with

132


Form CO, paragraphs 195 to 210. 134

Form CO, paragraph 213 and Cemex's amended report submitted on 23 May 2014.

EN 39 EN

shares above [10-20]* %, and two more (Votorantim and Tudela Veguín) have

shares above [5-10]* %.

(191) In the second place, when assessing symmetry, all of the dimensions of such

symmetry amongst suppliers should be taken into account, including not only

symmetry in market shares but also incremental costs, customer loyalty and capacity.

(192) In the third place, the Notifying Party claims that market shares are unstable and

there is a significant customer switching in the Centre region clusters.

(193) In the fourth place, the Notifying Party observes that Cemex’s prices in the Madrid

province are not systematically higher than the prices of Cemex in the provinces of

the Levante region.

(194) In the fifth place, the Notifying Party alleges that the level of Cemex’s margins in the

Centre region clusters (namely Castillejo) are very similar to the margins that Cemex

obtains from its plants in the Levante region clusters (namely Buñol and Alicante)

and are insufficient to cover their fixed and variable costs. In this context, the

Notifying Party suggests that the Return on Capital Employed (“ROCE”) is the

relevant measure to assess profitability and that this has been below the Weighted

Average Cost of Capital (WACC) since 2010. This evidence is used by the Notifying

Party to support its claim that prices in the Centre region clusters are not above the

competitive level.

6.6.3. Assessment of the Centre region clusters

(195) The Commission has analysed whether the proposed transaction will make pre-

existing coordination easier, more stable or more effective or make coordination

significantly more likely in the Centre region clusters.135

(196) While certain features of the Centre region clusters may make them prone to

potential coordination and there are elements compatible with potential current

coordination, the Commission has not found a sufficiently cogent and consistent

body of evidence that the proposed transaction will make coordination easier, more

stable or more effective (see section 6.6.3.1).

(197) Similarly, the Commission has not found a sufficiently cogent and consistent body of

evidence that competitors that were previously not coordinating will be significantly

more likely to engage in coordination as a result of the proposed transaction (see

section 6.6.3.2).

6.6.3.1. Assessment of a strengthening of potential current coordination

(198) This section outlines the results of the Commission’s competitive assessment of

coordinated effects by way of a strengthening of potential current coordination.

135

The Commission has also analysed whether the proposed transaction will make pre-existing

coordination easier, more stable or more effective or make coordination significantly more likely in the

Levante region clusters and in the other regions of Spain clusters. The Commission has not found a

sufficiently cogent and consistent body of evidence to support the conclusion that this would be likely.

In the Levante region clusters, the market structure will remain fragmented (more than ten players) and

market shares will continue to be highly asymmetric. As for the other regions of Spain clusters, the

increment brought about by the proposed transaction will be less than [0-5]* % in each of the four

clusters. Moreover, there will continue to be a high degree of asymmetry in terms of vertical integration

in each of the four clusters, with the presence of integrated cement producers, grinding mills and

importers.

EN 40 EN

(199) The first part of this section presents the Commission’s findings on the existence of

potential current coordination (section 6.6.3.1(a)(i)) and examines the facilitating

factors for such coordination (section 6.6.3.1(a)(ii)) such as the ability of competitors

to reach the terms of coordination, of monitoring deviations and of activating

effective deterrence mechanisms as well as outsiders’ ability to jeopardise the

coordination’s expected outcome.

(200) The second part of this section describes the Commission’s findings on the merger-

specific effects of the proposed transaction with regard to the strengthening of

potential current coordination (section 6.6.3.1(b)).

(a) Assessment of potential current coordination

(i) Evidence of potential current coordination

(201) The Commission considers that the most likely mechanism for potential current

coordination in the Centre region clusters would be customer allocation whereby

competitors would refrain from approaching rivals’ customers with low prices. This

potential current coordination would involve the Parties, Lafarge and CPV (hereafter

denominated as "the four major cement producers").

(202) The Commission has thus investigated the hypothesis that the four major cement

producers might face limited incentives to strive to attract new customers

aggressively. Under such a scenario, the four major cement producers could benefit

from potential current coordination through increased margins and therefore profits.

(203) For the reasons set out in recitals (204) to (272), the Commission has not found a

sufficiently cogent and consistent body of evidence of potential current coordination

between the four major cement producers in the Centre region clusters.

(1) Market investigation

(204) A limited number of customers that responded to the market investigation indicated

that there may be some current coordination in the grey cement supply in the Centre

region clusters.136

Despite these claims, overall the Commission considers that it is

unlikely that there is any potential current coordination.

(205) First, independent distributors would have the potential to undermine the

sustainability of any potential current coordination. As distributors sell cement from

different producers, this means that whenever a customer is lost to a distributor, it is

not straightforward for one of the four major cement producers to monitor to which

rival the customer has been effectively lost. In that regard, respondents to the market

investigation indicated that distributors have a strong presence in the Centre region

clusters. One competitor mentioned that "the presence of distributors is well

developed in Madrid, Castilla Leon and Castilla La Mancha. It is reduced in Levante

and inexistent in Cataluña".137

Additionally, in the last years the percentage of the

sales of grey cement to distributors has been increasing in the Centre region clusters.

As one competitor with a plant in the Centre region clusters mentioned "since the

136

See replies to questions 34 and 45 - Phase I questionnaire to customers-cement and agreed minutes of

the call with a customer, 13 March 2014 and See replies to question 29 - Phase II questionnaire to

customers-cement (Q6) and replies to question 48 - Phase II questionnaire to customers-cement (Q7). 137

The Spanish original reads: "la presencia de distribuidores está muy desarrollada en Madrid, Castilla

León y Castilla La Mancha. Es reducida en Levante e inexistente en Cataluña". Reply to question 32 -

Phase II questionnaire to competitors-cement.

EN 41 EN

beginning of the crisis, reducing the risk of default is a relevant factor that drives us

to channel more sales through distribution".138

(206) Second, a large majority of customers in the Centre region clusters indicated that

they changed grey cement supplier at least once, if not more often, in the last three

years.139

Two of the main reasons for switching suppliers mentioned by respondents

were price and quality.140

A majority of customers mentioned that they receive price

offers from their usual supplier and at least one more supplier.141

Additionally, a

majority of customers mentioned that none of the four major cement producers has ever

refused to supply them when they have requested.142

(207) Third, there appears to have been aggressive competition between the four major

cement producers during 2013. One customer indicated, with respect to the Centre

region clusters, that "in the last year, Holcim behaved more aggressively with lower

prices and gained market share. As a consequence, CPV and Cemex replied by also

decreasing the prices in the places where Holcim has customers in order to capture

all the customers from Holcim".143

[Reference to Cemex internal document].144

[Reference to Holcim internal document].145

(2) The Commission's quantitative analysis

(208) The Commission has also analysed a number of quantitative elements about the grey

cement market in the Centre region clusters, namely the evolution of market shares,

customer switching and margins.

Market shares and their evolution

(209) The Commission requested and obtained data from Oficemen on the sales of its

members per plant and per province since 2005, as well as aggregate estimates

regarding the sales of non-members in order to compute market shares.

(210) On the one hand, in a context where demand increased until 2007 and then fell

sharply (by 72 % until 2012), the four major cement producers maintained relatively

stable market shares in the Madrid province. Moreover, the data indicates that, at

least since 2005, competitors other than the four major cement producers have had a

minimal and insignificant presence in the Madrid province (less than 2 % market

share overall during 2005-2013).

138

The Spanish original reads: "Desde que empieza la crisis, reducir el riesgo de impago es un factor

relevante que nos impulsa a canalizar más ventas a través de la distribución". Reply to question 31 -

Phase II questionnaire to competitors-cement. 139

See replies to question 8 - Phase II questionnaire to customers-cement (Q6) and to replies to question 33

- Phase II questionnaire to customers-cement (Q7). 140

See replies to question 8 - Phase II questionnaire to customers-cement (Q6) and replies to question 33 -

Phase II questionnaire to customers-cement (Q7). 141

See replies to question 30 - Phase II questionnaire to customers-cement (Q6) and replies to question 50



Phase II questionnaire to customers-cement (Q7). 143

The Spanish original reads: "Holcim en el último año y medio, se ha comportado de manera más

agresiva con precios más baratos y ha ganado cuota de mercado. Ante este hecho, Cementos Portland

y Cemex han respondido bajando también los precios en los lugares donde se consume Holcim para

intentar captar a todos los compradores de Holcim". Agreed minutes of the call with a distributor, 13

March 2014. 144

[Reference to Cemex internal document]. 145

[Reference to Holcim internal document].

EN 42 EN

(211) On the other hand, the analysis has shown a less stable trend in market shares in the

other provinces of the Centre region clusters, resulting in an absence of stability of

market shares in the Centre region clusters.

Switching

(212) The Commission assessed switching data in the Centre region clusters as this can

provide indications as to possible current coordination.

(213) In order to be able to conduct its assessment, and in the absence of a reliable win/loss

database146

, the Commission performed an analysis of the purchasing patterns of the

Parties' customers. This analysis was based on sales volumes, as recorded in the

transaction data sets submitted by the Parties.147

(214) Overall, the Commission could not establish a clear switching pattern during the

period for which data is available. On the one hand, over the last few years (2010-

2013), out of the total volumes delivered by the Parties in the Centre region clusters,

less than [20-30]* % related to new customers, in any given year. On the other hand,

the specific proportion of new volumes in a given year varied significantly. Periods

of low levels of volumes sold by the Parties to new customers were followed by

years of high new volumes.

Margins

(215) The Commission has analysed the average gross margins achieved by the Parties in

the Centre region clusters for the period between 2005 and 2013 as this can also

provide indications as to possible current coordination.148

The Commission’s

analysis was based on sales, revenues, production and cost data submitted by Cemex

and Holcim.

(216) The results of the Commission’s analysis of average gross margins in the Centre

region clusters are the following.

(217) First, overall, in Spain, demand for cement significantly dropped between 2007 and

2013. As a consequence, spare capacity for producing cement has become widely

available to all competitors (in the range of 60-80 % for the Parties). In a competitive

market for a homogeneous product characterised by excess capacity149

, profit

maximising behaviour by the four major cement producers would be expected to

bring prices close to the average variable costs, with a consequent decrease in the

average gross margins.

146

As acknowledged by Cemex, "the information on lost and won customers is not systematically

registered in Cemex's systems […] this information is not complete at all […] the reliability of this

information is highly questionable." 147

The Commission has measured switching by the proportion of new customers in any given year (that is,

customers that were not buying from a given company the year before). The proportion of lost

customers is not a meaningful proxy for customer switching in the grey cement industry, given that the

sharp fall in demand is such that many customers lost are customers potentially exiting the market as

opposed to customers lost to competitors. 148

Average gross margins by cluster have been computed as the difference between ex-works prices and

unit variable production costs (including fuel, electricity and raw material costs, including clinker). The

unit variable production cost associated to each transaction was the cost of the plant originating the

cement sold in that transaction. 149

It is also characterised by the possibility to price discriminate. See replies to question 44 – Phase II

questionnaire to competitors-cement. In addition, customers tend to be rather localised and rarely active

across different regions. This limited activity and interaction of customers across different regions is

consistent with a low level of awareness about prices charged by their supplier to other customers.

EN 43 EN

(218) In this respect, while the average gross margins of the Parties in the Centre region

clusters have significantly decreased between 2007 and 2013, the average gross

margins achieved by Cemex in the Castillejo cluster were still approximately EUR

[...]* per tonne in 2013.

(219) Second, in order to complete its assessment of average gross margins in the Centre

region clusters during the period between 2005 and 2013, and in the absence of

reliable average gross margin estimates for Holcim150

, the Commission has also

collected sales, production and cost data from the other major cement producers in

the Centre region clusters.

(220) The analysis has shown that while all of the four major cement producers in the area

had average gross margins above their variable production costs during the period

between 2005 and 2013, there was significant variability among the average gross

margins achieved by the four major cement producers. This variability may reflect

differences in the current business models adopted by the four major cement

producers in the Centre region clusters, such as different levels of vertical integration

and different proportions of sales achieved via independent distributors. It may also

be affected by differences in the recording of sales and costs data associated to a

particular product.

(ii) Possible facilitating factors of potential current coordination

(1) Reaching terms of coordination

(221) For competitors to reach a common perception as to how coordination should work,

coordinating firms should have similar views regarding which actions would be

considered to be in accordance with the aligned behaviour and which actions would

not.151

Coordination is more likely to emerge in markets where it is relatively simple

to reach a common understanding on the terms of coordination.

(222) There are certain market characteristics that make it relatively simple to reach a

common understanding on the terms of coordination. A stable economic

environment, a small number of competitors, a homogeneous product, a relative

symmetry of competitors and the existence of structural links between competitors

are factors that can make it easier for competitors to reach terms of coordination.152


sufficiently cogent and consistent body of evidence that the structural features of the

Centre region clusters would make it relatively simple for the four major cement

producers to reach a common understanding on potential current coordination.

(224) On the one hand, a number of structural features of the Centre region clusters could

make it easier for the four major cement producers to reach a common understanding

on potential current coordination.

150

The average gross margins achieved by Holcim in the Yeles cluster decreased from EUR […] in 2012

to just above EUR […] in 2013, following the dismantling of the clinker facility in Yeles. The

Commission notes, however, that the costs information provided by Holcim is insufficient to make a

reliable inference based on these figures. This is because the Parties acknowledged that the split

between the upstream and downstream costs of the integrated plants is not currently recorded by

Holcim in a way that would allow the Commission to reliably identify the cost of clinker for the

production of cement for each plant. 151

Horizontal Merger Guidelines, paragraphs 44-48. 152


EN 44 EN

(225) First, apart from the four major cement producers, a limited number of other

competitors are active in the two clusters in the Centre region. As mentioned in

recital (162), only Lafarge and CPV have plants located close to the Parties’ plants.

The remaining competitors with sales in the clusters, Balboa and Votorantim, have

plants located further away, just outside or in the southern part of the clusters.

(226) Given the importance of transport costs for the competitive constraint posed by

competitors in the Centre region clusters (see recital (163)), Balboa and Votorantim

are at a competitive disadvantage vis-à-vis the four major cement producers in the

centre and northern areas of the Centre region clusters. As one of these two

competitors noted "the volumes it sells in Madrid and Toledo are very small" and "it

does not consider itself an important competitor in the area of Madrid given the

transport cost from its plant to this area".153

The other competitor noted that "after

trying to sell cement in the area of Madrid from its closer plant located at 400 km,

the idea was abandoned given that the distances and the prices in that market make

it non profitable".154

(227) The shares of supply in the Madrid province (located in the middle of the Centre

region clusters) support this conclusion. The four major cement producers supplied

[90-100]* % of sales in the Madrid province 2012, with only [0-5]* % remaining

covered by other cement producers.155

This is also confirmed by the data received

from the Parties according to which 85–95 % of customers in the Centre region

clusters currently have only the four major cement producers (or fewer) as an option

within a 150 km radius.156

(228) Second, the four major cement producers in the Centre region clusters have contacts

in several neighbouring geographic and product markets, including other European

markets with the exception of CPV. They are present as cement producers in

different regions of Spain and in different European countries, as producers of

aggregates and are also vertically integrated downstream into RMX and mortar and

upstream into clinker.157

(229) Third, grey cement is a largely homogeneous product with a high degree of

standardisation due to the existence of national and European standards as outlined in

recital (134), in particular with respect to sales for the production of RMX. Reaching

a common undertaking on potential current coordination in the Centre region clusters

is potentially easier for the four major cement producers since they produce a similar

product, face similar customers and are subject to similar shocks to demand and

production.

153

The Spanish original reads: "las cantidades que venden en Madrid y en Toledo son "muy pequeñas" and

"no se considera a sí mismo como un competidor importante en la zona de Madrid por el coste de

transporte que supone la distancia de su fábrica a esta zona". Agreed minutes of the call with a

competitor, 3 June 2014. 154

The Spanish original reads:"tras varios intentos de vender cemento a la zona de Madrid desde su planta

[…], la más cercana a esta zona pero a unos 400km, han abandonado la idea debido a que las

distancias y los precios del mercado hacen la operación no rentable". Agreed minutes of the call with a

competitor, 3 April 2014. 155


Source: Commission's calculations based on transaction data submitted by the Parties, complemented

by distance data (also submitted by the Parties) between each of the Parties' customers and each of the

cement plants in Spain. 157


EN 46 EN

the Centre region clusters would make it relatively simple for the four major cement

producers to reach a common understanding on potential current coordination.

(238) On the one hand, certain elements could be indicative of a high degree of

transparency in the Centre region clusters.

(239) First, the four major cement producers appear to be able to track their market shares

as well as, to a certain extent, those of the other major cement producers per

province. [reference to Holcim internal document].162

[reference to Cemex internal

document].163

Oficemen collects and publishes monthly aggregated data about grey

cement production, sales, imports and exports at national, regional and sub-regional

level.164

This information is also published at a disaggregated level by province or by

plant with a delay of one year.

(240) Second, as regards prices, the four major cement producers seem to have extensive

information regarding the price letters of both the other three major cement

producers and of other competitors and even their price levels. Respondents to the

market investigation indicated that the four major cement producers inform their

customers by letters on a regular basis of future price increases.165

The Parties

confirmed that they sent letters announcing their general intention to increase prices,

however the Parties have not generally increased prices recently.166

Some customers

pointed towards competitors announcing similar price increases at the same time,

generally towards the end of the year.167

(241) Holcim's internal strategy documents contain numerous references to the price

increases announced by the four major cement producers and by other competitors,

suggesting a degree of transparency on the future evolution of prices. [Reference to

Holcim internal documents].168

Internal documents of Cemex also show that

monitoring the price offers of competitors is part of its business intelligence and

decision-making.169

(242) Third, as regards transparency of customers lost, transaction data from the Parties

indicates that even if the Parties have between [...]* and [...]* customers in a given

year across Spain, the bulk of the customer base is rather concentrated, with a long

tail of small customers.170

This concentration of the customer base could facilitate the

ability of the four major cement producers to identify to which competitor a customer

162

[Reference to Holcim internal document]. 163

[Reference to Cemex internal document].. 164

Oficemen publishes information for the following regions of Spain: Andalusia, Cataluña, Centre, North

and West. As regards the information on sales of grey cement by the Oficemen members, the Centre

region is further disaggregated into the sub-regions of Extremadura, Levante-La Mancha (including

Comunidad Valenciana, Murcia and Castilla-La-Mancha) and Comunidad Madrid (which corresponds

to the Madrid province). These sub-regions are defined such that at least four companies are active in

the sub-region. See "Reglamento de Estadistica", Oficemen. 165

See replies to question 54 - Phase I questionnaire to competitors-cement; replies to question 24 - Phase

II questionnaire to customers-cement (Q6) and replies to question 48 - Phase II questionnaire to

customers-cement (Q7). 166

The Parties claimed that they have not sent letter recently […]. 167


- Phase II questionnaire to customers-cement (Q7). See also agreed minutes of the call with a customer,

3 June 2014. 168



According to the transaction data provided by the Parties, the top 50 customers in 2012 represent

between [50-70] % of all volumes sold by each party in that year.

EN 47 EN

was lost. The ability of the four major cement producers to complement the

information on their own market share by monitoring a relatively limited number of

customers is supported by the internal documents of the Parties.[Reference to Holcim

internal document].171

[Reference to Cemex internal document].172

One competitor

also explained that it is able to identify the competitor winning its customers through

"the communication by other customers, or comments of other customers, or because

a visit by a sales person coincides with a delivery to the plant, or by seeing the bags

of the other supplier, or advertising".173

(243) Fourth, the Centre region clusters are characterised in general by the existence of

cross-supply relationships of clinker and grey cement between three of the four

major cement producers (Holcim, Cemex and Lafarge). [References to clinker supply

agreements].174

(244) On the other hand, other elements are not compatible with a high degree of

transparency in the Centre region clusters.

(245) First, price letters are not necessarily binding and the majority of competitors,

confirmed that the final price is ultimately determined by oral bilateral negotiation with

the customers.175

(246) Second an analysis of the role of distributors in the Centre region clusters has

highlighted that distributors could potentially jeopardise the ability of the four major

cement producers to understand to which rivals a given customer was lost. While

Cemex appears to currently make limited use of distributors, Holcim, Lafarge and

most notably CPV do appear to sell significant shares of their volumes through

distributors in the Centre region clusters.176

Distributors sell cement from different

producers and this means that whenever a customer is lost to a distributor, it is not

straightforward for one of the four major cement producers to monitor to which rival

the customer has been effectively lost.

(247) Third, the cross supplies of clinker and grey cement between CPV and the other three

major cement producers are limited. Regarding clinker, CPV does not have any

agreement with any of the other three major cement producers. As for grey cement,

during the period 2010-2012, out of Holcim's total purchases of grey cement in

Spain, [10-20]* % came from CPV, although these were small volumes compared to

Holcim's total sales (less than [0-5]* % of its total sales of grey cement in Spain). As

for Cemex’s total purchases of grey cement in Spain only [0-5]* % came from CPV.

Cemex’s grey cement sales to CPV were minor during this period, while Holcim did

not sell any grey cement to CPV.

(3) Deterrence mechanism

(248) The possibility of retaliation following a deviation is important for the stability of

coordination. Coordination is not sustainable unless the consequences of a deviation

are sufficiently severe to convince coordinating firms that it is in their best interest to

171



The Spanish original reads: "porque nos lo indica el cliente, o por comunicación de otros clientes, o por

comentarios de otros clientes, o por coincidir con un suministro en la planta del cliente durante la

realización de una visita comercial, por ver los sacos de otro proveedor, publicidad". Reply to question

39 - Phase II questionnaire to competitors-cement. 174

[…]. 175

See replies to question 43 - Phase II questionnaire to competitors-cement. 176

See recital (269).

EN 48 EN

adhere to the terms of coordination. It is thus the threat of future retaliation that can

keep the coordination sustainable. However, that threat is only credible if, where

deviation by one of the firms is detected, there is sufficient certainty that some

deterrence mechanism will be activated.177


sufficiently cogent and consistent body of evidence that the threat of future

retaliation in the Centre region clusters would keep any potential current

coordination sustainable.

(250) On the one hand, it appears that certain credible deterrence mechanisms could be

activated if deviation were detected.

(251) First, the four major cement producers could reduce the price to the deviator’s

cement customers so as to reduce its grey cement volumes and margins. This

mechanism could be effective given the lack of long-term contracts, the regularity of

cement purchasing and customer price sensitivity, as well as the excess capacity that

appears to characterise the supply of grey cement in the Centre region clusters.

(252) This punishment mechanism, if focused only in the Centre region, is unlikely to

disrupt prices of grey cement in other regions in Spain because there are many local

segments of a given geographic market and because prices do not seem to be

transparent for grey cement customers (unlike for producers). The large majority of

customers that responded to the market investigation indicated that they do not know

the prices charged by grey cement producers to other customers.178

This is consistent

with information submitted by the Parties, showing evidence of significant price

dispersion in the Centre region clusters. This lack of transparency on the customer

side would make it relatively inexpensive for the punishing firm to implement such a

punishment.

(253) Second, three of the four major cement producers (Holcim, Cemex and Lafarge)

could stop buying grey cement or clinker from the deviator, preferring to substitute it

for own production. This could have an impact on the deviator,179

without affecting

the other major cement producers carrying out the punishment to the same extent.

(254) Third, the four major cement producers could punish deviations in the grey cement

markets in the Centre region clusters through targeted reductions in the price of

RMX and mortar sold by their integrated downstream businesses or by reducing the

price of aggregates.

(255) Fourth, the four major cement producers have contacts in several Spanish regions as

well as in other European countries in what concerns the production of grey cement,

aggregates, RMX and mortar. As a result, any deviation from potential current

coordination in the supply of grey cement in the Centre region clusters may be

penalised in one or more other markets where the four major cement producers are

active.

(256) On the one hand, certain elements indicate that any deterrence mechanisms would

not be credible.

177


See replies to question 28 - Phase II questionnaire to customers-cement (Q6); replies to question 48 -

Phase II questionnaire to customers-cement (Q7) and replies to question 44 - Phase II questionnaire to

competitors-cement. 179

For example, by not being able to reach the CO2 targets.

EN 49 EN

(257) First, regarding clinker supply, any deterrence mechanism would not be accessible to

CPV or to the other three major cement producers against CPV, given the absence of

any clinker transaction between CPV and the other three major cement producers.

(258) Second, regarding grey cement, given that cross-supplies involve small volumes,180

any deterrence effect would not be strong.

(259) Third, the Commission did not find indications in the Parties’ internal documents that

the Parties tend to react to expansion attempts by the other major cement producers

by using targeted counter measures which could be interpreted as deterrence

mechanisms in relation to potential current coordination. In particular, the

Commission did not find in the Parties' internal documents any concrete example of

targeted reactions to behaviour by the other major cement producers as part of its

strategic behaviour intended to alleviate competitive pressure.

(260) Fourth, respondents to the market investigation did not provide any evidence of such

behaviour in the recent past.

(4) Reactions of customers, outsider competitors and potential entry

(261) For coordination to be successful, the actions of non-coordinating firms and potential

competitors, as well as customers, should not be able to jeopardise the outcome

expected from coordination.181

As regards the countervailing buyer power of

customers, by concentrating a large amount of its requirements with one supplier or

by offering long-term contracts, a large buyer may make coordination unstable by

successfully tempting one of the coordinating firms to deviate in order to gain

substantial new business.182


sufficiently cogent and consistent body of evidence that the actions of customers,

outsider competitors and potential entry could not jeopardise the outcome expected

from potential current coordination between the four major cement producers in the

Centre region clusters.

(263) On the one hand, certain elements suggest that customers, outsider competitors and

potential entry could not jeopardise the outcome expected from potential current

coordination between the four major cement producers in the Centre region clusters.

(264) First, regarding the reaction of outsider non-integrated suppliers, their strength in the

Madrid area has already been reduced by past consolidation of the major suppliers.

[Reference to Holcim internal document].183

(265) Second, entry barriers in Centre region clusters seem to be high and entering the

clusters by building an integrated cement plant is largely irreversible. The Notifying

Party estimates the investment necessary for a greenfield investment with a capacity

of 2 million tonnes per year to be at least EUR [...]* million.184

Factors inhibiting

such entry include the access to a limestone quarry to produce cement and the need

to comply with environmental regulations.

180

See Cemex's reply to the Commission request for information, 21 March 2014, question 4, and Holcim's

reply to the Commission request for information, 21 March 2014, question 4. 181





EN 50 EN

(266) Third, imports may be insufficient to jeopardise the result expected from any

potential current coordination. Given their inland location, it is more expensive for

imports to reach the Centre region clusters with a competitive offer. According to

information provided by Oficemen, of the total imports of grey cement into Spain in

2012, only 0.5 % was delivered to Centre region clusters.185

(267) Fourth, given the lack of substitutable products for grey cement and the reduced

number of producers in those clusters, the likelihood of customers being able to

jeopardise the results expected from potential current coordination seems to be low.

(268) On the other hand, a number of elements suggest that customers, outsider

competitors and potential entry could jeopardise the outcome expected from potential

current coordination between the four major cement producers in the Centre region

clusters.

(269) First, distributors play an important role in the Centre region clusters (see recital

(205)), and have the potential to jeopardise any potential current coordination. This is

supported by both the internal documents of the Parties and the responses to the

market investigation. [Reference to internal documents of the Parties].186

As one

competitor explained "distributors often regulate prices of the zones, if there is an

excessive price at some point, they buy cement in another province and send it to

where is more expensive".187

Regarding the responses to the market investigation,

they indicated that distributors in the Centre region potentially offer cement to all

customers, except to those that are already buying from the brand that the distributor

offers. As one distributor selling cement of Lafarge mentioned, "it can offer cement

to clients that usually buy from other distributors or producers such as Holcim and

CPV".188

Additionally, and since some distributors buy cement from several of the

four major cement producers, they may even offer one of the cement brands they

represent to customers that are buying cement of the other brands they represent. As

one distributor in the Centre region noted that "if in a given area a customer is

buying cement from Lafarge, (…) may offer this customer cement from Holcim".189

(270) Second, there are alternative integrated cement producers with plants located in the

proximity of the Centre region clusters such as Tudela, Veguín and Balboa which

would have some potential to jeopardise the outcome expected from potential current

coordination between the four major cement producers in certain parts of the Centre

region clusters. This potential is however limited notably because, given the location

of their plants, some in north of the cluster (namely Tudela Veguín), others in

southwest of the cluster (Balboa and Votorantim), the alternative cement producers

would have difficulties in jeopardising the outcome expected from potential current

coordination in all parts of the Centre region clusters. For example, a competitor

located in a neighbouring province to the Centre region clusters noted that "the price

in the area of Madrid would have to increase by EUR [15-35] per tonne to become

185

Source: Oficemen. 186


The Spanish original reads: "Los distribuidores suelen regular los precios de las zonas, ya que si en

algún punto hay un precio excesivo, lo distribuidores compran el cemento en otra provincia y lo envían

donde se venda más caro". Reply to question 32 - Phase II questionnaire to competitors-cement. 188

The Spanish original reads: "puede ofertar cemento a clientes que compran habitualmente cemento a

otros fabricantes o distribuidores Holcim, Cementos Portland Valderrivas)". Agreed minutes of the call

with a distributor, 4 June 2014. 189

The Spanish original reads: "si en una zona determinada un cliente consume cemento de Lafarge, […]

le puede ofrecer cemento de la marca de Holcim". Agreed minutes of the call with a distributor. 3 June

2014.

EN 51 EN

profitable for it to sell in this area".190

Another competitor located outside the Centre

region clusters noted, regarding sales in Madrid, that "for having positive margins it

would have to sell cement EUR 10 per tonne more expensive".191

Two competitors

with plants located in the Centre region clusters also mentioned that they would not

be able to compete in some areas of the clusters (see recital (226)).

(271) Third, instead of building an integrated cement plant, an outside competitor or

potential supplier could simply set up a grinding station and ship clinker from within

the group or purchase it from third parties, which would lower the costs of such an

initial investment. According to the Notifying Party, the investment cost for a

grinding station of approximately 500 kt could amount to between EUR 30 and 50

million.192

(272) Fourth, several customers in the Centre region clusters confirmed that they request

price offers from several of the major cement producers in order to compare their

supplier's offer.193

In addition, one customer mentioned that "it is easier to switch

supplier [in the Centre region]".194

(iii) Conclusion on potential current coordination

(273) Based on the considerations set out in sections 6.6.3.1(a)(i) and 6.6.3.1(a)(ii), the

Commission concludes that the current market outcomes in the Centre region clusters

are, on balance, not sufficiently indicative of the existence of potential current

coordination amongst the four major cement producers.

(b) Assessment of merger-specific changes

(274) As established in sections 6.6.3.1(a)(i) to 6.6.3.1(a)(iii), it is unlikely that the current

market outcomes in the Centre region clusters can be associated with the existence of

potential current coordination amongst market participants.

(275) As a result, the Commission does not have to make a finding as to whether the

changes that this merger brings about will make coordination easier, more stable or

more effective to a degree that could be considered to give rise to a significant

impediment to effective competition in the Centre region clusters.

6.6.3.2. Assessment of a potential creation of coordination

(276) The Commission has also assessed whether, as a result of the proposed transaction,

the four major cement producers in the Centre region clusters will be significantly

more likely to coordinate their competitive behaviour. The Commission has

concluded that this will not be the case.

(277) First, the reduction in the number of competitors brought about by the proposed

transaction is unlikely to have a significant effect on market transparency and,

therefore, on the possibility to monitor deviations from coordination. As outlined in

section 6.6.3.1(a)(ii)(2), market transparency in the Centre region clusters derives

190

The Spanish original reads: "el precio del cemento en la zona de Madrid tendría que incrementarse en

unos [15-35€ por tonelada] para que resultase rentable vender en esta zona". Agreed minutes of the

call with a competitor, 4 June 2014. 191

The Spanish original reads: "para poder tener márgenes de beneficio tendría que vender en origen el

cemento a 10 €/tonelada más caro". Agreed minutes of the call with a competitor, 21 March 2014. 192




The Spanish original reads: "facilidad que cree que existe para cambiar de proveedor en su zona".

Agreed minutes of the call with a distributor. 27 May 2014.

EN 52 EN

from commercial links between the four major cement producers, from publications

of trade associations, from the sending of price increase announcement letters as well

as from information obtained directly from customers. It is therefore unlikely that the

proposed transaction will make it easier for the four major cement producers to

access those sources of information and will therefore not improve market

transparency in any significant way.

(278) Second, there is no indication that the proposed transaction will strengthen the

possible deterrence mechanisms by increasing the retaliatory power held by the four

major cement producers. Holcim does not have any plants located close to Lafarge’s

and CPV’s plants, with the exception of the Jerez plant which is in the same area as

one of CPV's plant (see Figure 1).

(279) Third, cross-supplies of grey cement will continue to be low after the proposed

transaction and CPV does not have any agreement for the supply of clinker with the

Parties.

(280) Fourth, there is no indication that the proposed transaction will lead to a weakening

of the possible reaction of non-coordinating firms or new entrants. In particular, there

are no indications that the incentives of possible outsiders or new entrants would

change as a result of the proposed transaction. After the proposed transaction,

distributors (which are used to a significant extent by Holcim, Lafarge and CPV in

the Centre region clusters) will still be in a position to jeopardise the customer

sharing resulting from the coordination scheme.

6.6.4. Conclusions on coordinated effects

(281) Based on the considerations set out in recitals (195) to (280) and the evidence

available to it, the Commission concludes that the notified transaction would not

significantly impede effective competition in the Centre region clusters due to

coordinated effects.

6.7. Competitive assessment - Vertical effects

6.7.1. Analytical framework

(282) A vertical merger may give rise to foreclosure. A merger is said to result in

foreclosure where the access of actual or potential rivals to markets is hampered or

eliminated as a result of the merger, thereby reducing these companies' ability and/or

incentive to compete.195

(283) Two forms of foreclosure can be distinguished. The first is where the merger is likely

to raise the costs of downstream rivals by restricting their access to an important

input (input foreclosure). The second is where the merger is likely to foreclose

upstream rivals by restricting their access to a sufficient customer base (customer

foreclosure).196

(284) Input foreclosure arises where, post-merger, the new entity would be likely to restrict

access to the products that it would have otherwise supplied absent the merger,

thereby raising its downstream rivals' costs by making it harder for them to obtain

supplies of the input under similar prices and conditions as absent the merger. This

may lead the merged entity to profitably increase the price charged to consumers,

195

Guidelines on the assessment of non-horizontal mergers under the Council Regulation on the control of

concentrations between undertakings, OJ C 265, 18.10.2008 ("Non-Horizontal merger guidelines"),

paragraph 29. 196

Non-Horizontal merger guidelines, paragraph 30.

EN 53 EN

resulting in a significant impediment to effective competition.197

In assessing the

likelihood of such scenario, the Commission examines, first, whether the merged

entity would have, post-merger, the ability to substantially foreclose access to inputs,

second, whether it would have the incentive to do so, and third, whether a foreclosure

strategy would have a significant detrimental effect on competition downstream.198

(285) Customer foreclosure may occur when a supplier integrates with an important

customer in the downstream market. Because of this downstream presence, the

merged entity may foreclose access to a sufficient customer base to its actual or

potential rivals in the upstream market (the input market) and reduce their ability or

incentive to compete. In turn, this may raise downstream rivals' costs by making it

harder for them to obtain supplies of the input under similar prices and conditions as

absent the merger. This may allow the merged entity profitably to establish higher

prices on the downstream market.199

In assessing the likelihood of a customer

foreclosure scenario, the Commission examines, first, whether the merged entity

would have the ability to foreclose access to downstream markets by reducing its

purchases from its upstream rivals, second, whether it would have the incentive to

reduce its purchases upstream, and third, whether a foreclosure strategy would have a

significant detrimental effect on consumers in the downstream market.200

6.7.2. Notifying Party's arguments

(286) The Notifying Party submits that the integration of Holcim’s cement, RMX and

mortar assets into Cemex would not result in any vertical foreclosure effects.

(287) Regarding input foreclosure,201

first, the Notifying Party submits that the proposed

transaction would not give it the ability to adopt such a strategy since the merged

entity will compete with several cement producers and importers which could easily

supply cement to RMX and mortar producers given the excess capacity in the grey

cement market and the absence of long-term and exclusivity contracts. Additionally,

the Parties' combined market shares both in the upstream grey cement and

downstream RMX and mortar markets will be moderate.

(288) Second, the Notifying Party argues that the merged entity will not have the incentive

to adopt an input foreclosure strategy due to (i) the absence of capacity constraints of

downstream RMX and mortar competitors, (ii) the moderate market shares in the

downstream RMX and mortar markets, and (iii) customer buyer power.

(289) Third, the Notifying Party argues that any attempt by the merged entity to raise

cement prices will be unfeasible and unable to have any impact on effective

competition given that (i) no downstream RMX and mortar producer represents a

high proportion of the Parties' sales of grey cement, (ii) entry barriers in the

downstream RMX and mortar markets are low, (iii) there are credible competitors in

the downstream RMX and mortar markets, and (iv) customers have a high bargaining

power.

(290) Regarding customer foreclosure,202

first, the Notifying Party argues that the merged

entity will not have the ability to adopt such a strategy since it will not be an

197

Non-Horizontal merger guidelines, paragraph 31. 198






EN 54 EN

important customer for any producer and there are sufficient alternatives in the

downstream RMX and mortar markets.

(291) Second, the Notifying Party argues that the merged entity will not have the incentive

to adopt a customer foreclosure strategy. This is due to (i) the unlikelihood of price

rises in the upstream grey cement market in case of the adoption of such a strategy

and (ii) the moderate market shares in the downstream RMX and mortar markets.

(292) Third, the Notifying Party argues that a strategy for the Parties to stop purchasing

grey cement from rival firms is unlikely to raise prices in the downstream RMX and

mortar markets as: (i) rival cement players only supply a tiny fraction of the Parties’

requirements for RMX and mortar purposes, (ii) there is no capacity constraint in the

grey cement market, (iii) there are no entry barriers in the RMX and mortar markets;

and (iv) RMX and mortar producers enjoy high bargaining power.


(293) The proposed transaction results in a number of vertically affected markets, namely

in relation to the supply of grey cement to mortar plants and the supply of grey

cement to RMX plants.

(294) For the reasons set out in recitals (295) to (296), the Commission has concluded that

the proposed transaction would not significantly impede effective competition in the

markets for grey cement and in the markets for RMX and mortar due to vertical

effects.

(295) First, as described in section 6.5, the merged entity will not have market power in the

upstream markets of grey cement since the combined market shares are relatively

low (as in the case of the Buñol, Yeles, Castillejo, Alcanar, Jerez and Morata

clusters). Moreover, there will be a number of alternative suppliers of grey cement

available post-transaction. The only exception could be the Lloseta cluster, but in this

case the Parties are not present in any vertically related market downstream.

(296) Second, the Parties will not have significant degree of market power in the

downstream RMX and mortar markets as will be described in sections 8.3.3 and

9.3.3 and there will be a number of alternatives in those markets.

6.7.4. Conclusions on vertical effects

(297) Based on considerations set out in recitals (282) to (296) and the evidence available

to it, the Commission concludes that the notified transaction would not significantly

impede effective competition in the various geographic markets for grey cement

defined by circles with radii of 150 km drawn around the Parties' cement production

facilities in Spain due to vertical effects.

6.8. Conclusion on grey cement

(298) The Commission therefore concludes that the proposed transaction would not

significantly impede effective competition on the relevant markets for grey cement.

7. AGGREGATES

7.1. Relevant product market definition


(299) Aggregates are used as base materials in the construction of roads, buildings and

other infrastructure, as well as raw materials used to make products such as concrete,

asphalt, and mortar. They may be quarried from land and dredged from the sea

(together, “primary aggregates”); obtained from the waste products of other mining

EN 55 EN

or industrial activities (“secondary aggregates”); or obtained from recycled sources

such as demolition sites and construction waste (“recycled aggregates”). They are

typically used in construction, although they are also supplied for non-construction

uses such as railway ballast.203

(300) In previous decisions the Commission has considered aggregates as a single, separate

product market.204

Moreover, the Commission considered, but ultimately left open, a

further segmentation between (i) primary aggregates (crushed rock, gravel and sand)

and (ii) secondary / recycled aggregates (such as colliery and china clay waste, slate,

power station ash, slags and demolition/construction waste.)205

Within the primary

aggregates category, the Commission also considered but left open a further

distinction between (i) sand and gravel and (ii) crushed rock 206


(301) The Notifying Party submits that despite a certain lack of demand-side

substitutability between gravel and crushed rock on the one hand and sand on the

other hand, aggregates have consistently been found to constitute a single product

market. This is due to the fact that the choice between crushed rock or sand and

gravel is largely influenced by geology and availability for ready-mix concrete and

concrete production.207

In any event, the Notifying Party submits that the precise

product market definition for aggregates can be left open as the proposed transaction

gives rise to very limited local overlaps between the Parties' activities in Spain and

these only relate to primary aggregates.


(302) For the purpose of the assessment of the proposed transaction, the exact market

definition can be left open as the proposed transaction would not lead to a significant

impediment to effective competition in the EEA or any substantial part of it under

any plausible market definition.

7.2. Relevant geographic market definition


(303) In previous decisions, the Commission has considered the aggregates market to be

local/regional or at most national in scope and has retained a radius of 50 to 80 km

around each production site depending on the particularities of the areas

concerned.208

This is due to the fact that aggregates are heavy and voluminous

products with significant transport costs.

203

Commission’s decision of 16 May 2011 in Case No COMP/M.6153 – Anglo American/Lafarge/JV,

paragraph 11. 204

Commission’s decision of 25 May 2004 in Case No COMP/M.3415 CRH/Semapa/Secil JV, paragraph

10; Commission’s decision of 1 August 2003 in Case No COMP/M.3141 - Cementbouw/Enci/JV

paragraph 11. 205

Commission's decision of 13 January 2000 in Case No. COMP/M.1779 – Anglo American/Tarmac,

paragraph 20. 206

Commission's decision of 10 June 2010 in Case No. Comp/M.5803 - Eurovia/Tarmac, paragraph 10. 207


Commission’s decision of 14 March 2005 in Case No COMP/M.3713 - Holcim/Aggregate Industries,

paragraph 8, and Commission’s decision of 1 March 2001 in Case No COMP/M.2317 – Lafarge/Blue

Circle (II), paragraph 10.

EN 56 EN


(304) In light of the decisional practice of the Commission and the Spanish Competition

Authority209

, the Notifying Party has provided market share data for the radii of 50

and 80 km around the Parties' quarries.210






7.3. Competitive assessment

7.3.1. The Parties' activities

(306) Cemex's aggregate quarries are located in Valencia, the centre region of Spain

(Madrid, Ciudad Real, Soria) as well as in other regions of Spain (Tarragona,

Barcelona, Menorca, Mallorca, Zaragoza, Ibiza). Holcim's aggregate quarries are

located in the Andalusian and Levante regions (Alicante, Almeria, Murcia, Cadiz,

Jaen, Malaga), the centre region of Spain (Ciudad Real, Madrid) as well as in other

regions of Spain (Castellon, Pontevedra).211


(307) The Notifying Party submits that there is no local area in which the Parties' activities

overlap and result in a combined share equal to or higher than 20 %. As such, the

Notifying Party considers that the concentration will not affect competition in the

aggregates market in the EEA or a substantial part of it.212

(308) Moreover, the Notifying Party argues that both input and customer foreclosure

effects can be excluded in the vertical relationship between aggregates and (i) RMX

and (ii) mortar.213

In relation to input foreclosure, the merged entity would lack the

ability and the incentive to adopt this strategy given: (i) the moderate market shares in

both the upstream aggregate and downstream RMX and mortar markets; (ii) the

competitors' overcapacity in each of the upstream aggregate markets; (iii) the absence

of capacity constraints of downstream RMX and mortar competitors; (iv) customer

buyer power; and (v) the absence of long-term/exclusivity contracts.

(309) As concerns customer foreclosure, the Notifying Party argues that there is no ability

and incentive to adopt such a strategy since: (i) neither Party is an important

customer in the markets at issue; (ii) there are sufficient alternative customers; (iii)

any price rise in each of the upstream aggregate markets is unlikely due to producers'

overcapacity and their low dependence on the Parties; and (iv) market shares in each

of the downstream RMX and mortar markets are moderate.

209

CNMC's decision (ex-CNC) of 30 July 2008 in Case No C/0083/08 – Holcim/Tarmac, section V.2.1

and CNMC's decision (ex-CNC) of 14 February 2008 in Case No C/0042/08 – Lafarge/OBMH, section

V.2.2. 210


See Cemex's reply to the Commission's request for information, 07.03.2014, Question 1. 212



EN 57 EN


(310) The Parties' aggregates activities in Spain are restricted to primary aggregates. The

proposed transaction will not lead to any horizontally affected markets in primary

aggregates as the Parties' combined shares will remain below 20 % in all local areas.

The proposed transaction would, however, lead to two horizontally affected markets

in the 80 km cluster if primary aggregates were further segmented between (i) sand

and gravel and (ii) crushed rock. For the radii of 50 km around the Parties' quarries,

the proposed transaction would not lead to affected markets under any plausible

market definition.

(311) Those two horizontally affected markets would be: (i) in the 80 km cluster around

Holcim's La Pola quarry (Madrid) in respect of sand and gravel and (ii) in the 80 km

cluster around Cemex's San Martin de la Vega quarry (Madrid) for crushed rock. In

those local areas, the Parties' combined market shares in 2012 were [20-30]* % and

[30-40]* %, respectively.214

Although in the cluster around San Martin de la Vega,

the Parties' combined market share in 2012 was [30-40]* %, the merged entity will

continue to face competition from a number of competitors post-transaction such as

Maresa and Hanson with markets share of 5-10 % respectively. Moreover, the

Parties' market shares were volatile during the period 2010-2012 in both clusters with

a variation of more than 10 percentage points from 2011 to 2012.

(312) Regarding vertical effects, the proposed transaction would not significantly impede

effective competition as the merged entity will neither have market power in the

upstream markets for aggregates as mentioned in recitals (310) to (311) nor in the

downstream markets for RMX and mortar (as will be described in sections 8.3.3 and

9.3.3).

(313) Furthermore, no third party has put forward claims in the market investigation

according to which effective competition would be significantly impeded in any local

aggregates market.

7.4. Conclusion on aggregates

(314) The Commission therefore considers that the proposed transaction would not

significantly impede effective competition on the relevant markets for aggregates.

8. READY MIX-CONCRETE



(315) RMX is an industrially manufactured product which is obtained from the mixture of

cement (10-15 % of the product), aggregates (85-90 %), water and additives and

subsequently transported in a semi-wet form in specific vehicles (“mixer trucks”) to

the point of use (civil works or buildings). RMX is usually sold in large volumes.215

214

The Notifying Party indicates that market shares in 2013 do not differ significantly from market shares

for 2012 as estimated in the Form CO. See Cemex's reply to the Commission's request for information,

17 June 2014, Question 5. 215


EN 58 EN

(316) In previous decisions, the Commission has consistently considered RMX as a single,

distinct product market.216


(317) The Notifying Party submits that while there are different qualities and varieties of

RMX, RMX constitutes a single distinct product in line with the Commission's

previous decisions.217


(318) The vast majority of RMX customers and producers that responded to the market

investigation stated, in line with the Commission past decisional practice, that RMX

is a product distinct from any other product used in construction.218



considers that RMX constitutes a distinct relevant product market.



(320) The geographic market for RMX is determined by road connections and the time

span during which the material can be safely transported before hardening. Previous

Commission investigations considered but left open a radius of 15-40 km around a

production site.219

The Spanish Competition Authority has stated on several

occasions that the geographic scope of the RMX market in Spain can be defined as

the area around each concrete plant up to a maximum distance of 20 to 30

kilometres.220


(321) The Notifying Party submits that for the purposes of the present case, the relevant

geographic market should be as a radius of 25 km around each of the Parties’ RMX

plants.221


(322) Respondents to the market investigation indicated that RMX does not travel long

distances.

216

Commission’s decision of 8 December 2004 in Case No COMP/M.3572 CEMEX/RMC, paragraph 12;

Commission’s decision of 7 August 2007 in Case No COMP/M.4719 HeidelbergCement/Hanson,

paragraph 21, and Commission’s decision of 16 May 2011 in Case No COMP/M.6153 Anglo

American/Lafarge / JV, paragraph 22. 217


See replies to question 29 - Phase I questionnaire to customers-cement and replies to question 7 – Phase

I questionnaire to customers-RMX. 219

Commission’s decision of 1 March 2001 in Case No COMP/M.2317 Lafarge Blue Circle (II),

paragraph 11; Commission’s decision of 14 March 2005 in Case No COMP/M.3713 Holcim/Aggregate

Industries, paragraph 9; Commission’s decision of 8 December 2004 in COMP/M.3572 Cemex/RMC,

paragraph 24; Commission’s decision of 7 August 2007 in Case No COMP/M.4719

HeidelbergCement/Hanson, paragraphs 21 and 29; and Commission’s decision of 5 June 2014 in Case

M.7009 – Holcim/Cemex West. 220

CNMC's decision (ex-CNC) of 14 February 2008 in Case No C-0042/08 Lafarge/OBMH, section V.2.3,

and CNMC's decision (ex-SDC) of 17 November 2005 in Case No N-05101 Lafarge Asland/Readymix

Asland, section V.2. 221


EN 59 EN

(323) First, RMX suppliers that responded to the market investigation indicated that more

than 74 % of their total sales of RMX are supplied within a radius of 25 km around

each RMX plant. This average figure reaches approximately 97 % if the radius is

extended to 40 km.222

(324) Second, customers that responded to the market investigation indicated that 82 % of

their total purchases of RMX are supplied from a distance of up to 25 km from their

location and 96 % of their total purchases of RMX are supplied from a distance of up

to 40 km from their location.223



considers that the relevant geographic market corresponds to a radius of 25 km

around each of the Parties’ RMX plants.



(326) Cemex's RMX plants are located in the centre region (Madrid, Toledo, Guadalajara,

Salamanca, Ciudad Real and Soria), the Levante region (Valencia, Castellon,

Alicante and Murcia), and in other regions of Spain (Mallorca, Menorca, Ibiza,

Tarragona, Barcelona, Zaragoza, and Teruel).224

(327) Holcim's RMX plants are located in the centre region (Madrid, Toledo, Salamanca

and Valladolid), the Levante and Andalusian regions (Valencia, Alicante, Murcia,

Almeria, Cadiz, Jaen, Granada, Malaga and Sevilla) and in other regions of Spain

(Pontevedra, Barcelona, and Tarragona).225


(328) The Notifying Party submits that the proposed transaction will not give rise to

unilateral or coordinated horizontal effects in the RMX market.226

(329) First, the Notifying Party argues that the supply for RMX markets in Spain includes

many players, including national players, local or regional players. As a result,

supply is highly diversified and atomised. In Spain, there are hundreds of RMX

producers of a varying size and geographic reach. The industry trade association227

reports 288 manufacturers as “active members”.

(330) Second, the Notifying Party submits that the markets for RMX have low entry

barriers. According to the Notifying Party, an RMX plant is a simple and affordable

facility (with a total cost of around EUR [...]*), which can be installed anywhere

outside urban centres. RMX’s main raw material is grey cement and aggregates,

which are plentiful and affordable across Spain due the extreme excess capacity of

cement plants and quarries.

(331) Third, the Notifying Party states that market shares in the markets for RMX are

highly volatile in the mid-term. This results from the fact that customers are

222

See replies to question 29 - Phase I questionnaire to customers-cement. 223

See replies to question 8 - Phase I questionnaire to customers-RMX. 224

See Cemex’s reply to the Commission's request for information, 07 March 2014, Question 1.Cemex's

total RMX plants are 115, however only 59 are open or mothballed. 225

See Cemex’s reply to the Commission's request for information, 07 March 2014, Question 1. Holcim's

total RMX plants are 91, however only 47 are open or mothballed. 226


Asociación Nacional Española Fabricantes de Hormigón Preparado (ANEFHOP)

EN 61 EN

competition. In the Buñol cluster, the merged entity will continue to face strong

competition from a number of credible competitors. Out of the five alternatives in

this cluster, three have more than [20-30]* % market shares. In the Campello and

Muchamiel clusters, there will still be a large number of alternatives (13, including

Hormigones y Morteros Serranos, S.L; Hormigones Relosa S.A; Lafarge Áridos y

Hormigones, S.A.U and HORMAR XXI, S.L) representing a combined market share

of more than [50-60]* %. Moreover, the Parties' market shares were volatile during

the period 2010-2012 in those clusters with a variation of more than 10 percentage

points during that period.


effective competition as the merged entity will not have market power either in the

upstream markets for grey cement and aggregates (as outlined in sections 6.5 and

7.3.3) or in the downstream markets for RMX.

(337) First, a majority of customers that responded to the market investigation indicated

that they can change supplier of RMX without incurring any significant cost.229

In

addition, when questioned if they have switched RMX supplier, the majority of

customers indicated that they have switched supplier in the last 5 years.230

As one

customer stated "If the price and the product are the same, there is no problem in

switching".231

In this regard, the majority of the customers also stated that the

contracts with RMX producers are for less than one year. Generally the contracts are

valid for the time of the works which sometimes may even be lower than one

month.232

(338) Second, a majority of customers that responded to the market investigation also

stated that neither Holcim nor Cemex are indispensable RMX suppliers in the areas

where they are present. The vast majority of customers indicated the existence of

alternative suppliers in all these areas.233

(339) Third, a majority of RMX suppliers that responded to the market investigation

indicated that the proposed transaction would not have any impact on the price of

RMX in Spain.234

Moreover, a majority of RMX customers indicated that the

proposed transaction will not have any impact on price and availability of RMX in

the areas where they are present. 235

(340) Fourth, no third parties have put forward substantiated claims according to which

effective competition would be significantly impeded in the RMX markets.

8.4. Conclusion on ready mix-concrete

(341) The Commission concludes that the proposed transaction would not significantly

impede effective competition in the relevant markets for RMX.

229



The Spanish original reads: "Si el precio no cambia y el producto es el mismo no hay problema". See

reply to question 13 - Phase I questionnaire to customers-RMX. 232



See replies to questions 63 - Phase I questionnaire to customers-cement. 235

See replies to questions 17 and 18 - Phase I questionnaire to customers-RMX.

EN 62 EN

9. MORTAR



(342) Mortar is a building material obtained from the mixture of a binding material

(cement and/or lime), sand and water. It is used, among other things, for bonding

bricks and stones, as well as for rendering and plastering. Depending on a number of

factors, certain additives can also be used to produce mortar.236

Mortar is a relatively

homogeneous product with no obvious substitutes.

(343) The Commission has previously analysed the market for mortar and considered but

left open a possible distinction based on the production technique between (i) on-site

mortars and (ii) pre-mix mortars.237

Within the pre-mix mortars category, the

Commission has also considered but left open a further distinction between (i) dry

mortars, (ii) wet mortars and (iii) ready-to-use paste.238

Moreover, the Commission

has considered but left open, a possible segmentation based on the end-applications

between (i) construction, (ii) facade and (iii) tile fixing.

(344) The Spanish Competition Authority has also considered but left open the possibility

of distinguishing between on-site mortars and pre-mix mortars and, within pre-mix

mortars, between wet and dry mortars.239


(345) The Notifying Party submits that pre-mix and on-site mortars are part of the same

market as they are essentially the same product and are used for the same purposes.

The only difference is that pre-mix mortar is supplied in finalised form to the

customer while on-site mortar is mixed by the customer itself.240

(346) Regarding wet and dry mortars, the Notifying Party submits that there is no supply-

side substitutability between wet and dry mortar. This is due to the fact that wet and

dry mortars have different physical features and are manufactured in different

facilities. Transportation and delivery of the products are also different.241

(347) Finally, the Notifying Party submits that final uses of mortar, that is to say ordinary

(construction) and special mortars (facade and tile-fixing) are different. Construction

mortar is used for various building construction purposes (for example floor

levelling, plastering, laying of masonry blocks, concrete repair, etc.). Facade mortar

236


On-site mortars are mortars mixed by the building contractor at the construction site while pre-mix

mortars are mortars pre-mixed at the factory of a mortar manufacturer. Commission’s decision of 13

January 2000 in Case No COMP/M.1779 - Anglo-American/Tarmac, paragraph 18; Commission’s

decision of 8 December 2004 in Case No COMP/M.3572 - Cemex/RMC, paragraph 13, and

Commission’s decision of 4 March 2008 in Case No COMP/M.4898 – Saint Gobain/Maxit, paragraph

16. 238

Dry mortars are mortars supplied in a dry powder form while wet mortars are mortars ready-mixed with

water at the factory. Ready-to-use paste is a mortar supplied as paste, including organic compounds as

binders. Commission’s decision of 8 December 2004 in Case No COMP/M.3572 Cemex/RMC,

paragraph 16 and Commission’s decision of 4 March 2008 in Case No COMP/M.4898–Saint

Gobain/Maxit, paragraphs 20 to 22. 239

CNMC's decision (ex-CNC) of 14 February 2008 in Case No C-0042/08 Lafarge/OBMH, section V.1.4,

CNMC's decision (ex-CNC) of 17 December 2008 in Case No C-0117/08 CIMPOR/Cemex, section

V.1.c), and CNMC's decision (ex-SDC) of 17.11.2005 in Case No N-05101 Lafarge Asland/Readymix

Asland, section V.1. 240


Form CO, paragraphs 106 and 108.

EN 63 EN

is applied to building facades as an outer layer for protective and/or aesthetic

purposes or as part of an external thermal insulation system. Tile-fixing mortar is

used as a material for fixing tiles in bathrooms, swimming pools and indoor/outdoor

tiles. Therefore, demand-side substitutability is low. However, supply-side

substitutability between these three types of dry pre-mix mortar segmented by final

use is high. This is due to the fact that (i) the large majority of mortar manufacturers

in Spain supply the three types of product; (ii) mortar manufacturers produce those

types in the same facilities and (iii) they use roughly the same raw materials and

equipment.242


(348) The vast majority of the suppliers that responded to the market investigation

considered that wet mortars should be distinguished from dry mortars in terms of

producers, price and the production equipment needed.243

Moreover, the large

majority of customers that responded to the market investigation have indicated that

dry mortar and wet mortar are not comparable in terms of technical features, type of

customer and price.244

(349) Regarding the distinction per final use within dry pre-mix mortar, the majority of

customers that responded to the market investigation have confirmed that

construction, tile-fixing and facade mortars are not comparable in terms of technical

features, type of customer, final use and price.245

From the supply-side point of view,

although the majority of the mortar producers that responded to the market

investigation considered that the producers for the three types of mortar are the same,

a large majority of them acknowledged that the products differ in terms of price.246



analyses the market for dry pre-mix mortar and its potential segmentations according

to the final use, that is to say construction, facade and tile-fixing. However, the exact

definition of the relevant market can be left open as the proposed transaction would

not lead to a significant impediment to effective competition in the internal market or

any substantial part of it under any plausible market definition.247



(351) The Commission has previously considered but left open the relevant geographic

market for mortar to be based on a radius of 120 km around the production plant248

whilst acknowledging that higher value products such as ready-to-use paste mortars

242


See replies to question 19 – Phase I questionnaire to customers-cement. 244

See replies to question 7 – Phase I questionnaire to customers- mortar. 245

See replies to question 8 – Phase I questionnaire to customers-mortar. 246

See replies to question 20 – Phase I questionnaire to customers-cement. 247

The Parties only commercialise pre-mix mortar and their activities only overlap in dry mortar. Form

CO, paragraph 111. 248

Commission’s decision of 13 January 2000 in Case No COMP/M.1779 - Anglo-American/Tarmac,

paragraph 23, Commission’s decision of 7 August 2007 in Case No COMP/M.4719 – Heidelberg

Cement/Hanson, paragraph 32, and Commission’s decision of 4 March 2008 in Case No

COMP/M.4898–Saint Gobain/Maxit, paragraph 27.

EN 64 EN

for tile-fixing or facade renderers can be transported economically over longer

distances.249


(352) The Notifying Party submits that the relevant geographic market for dry construction

mortar is the cluster of municipalities comprised by a circle defined by a 120 km

radius around a mortar plant. However, the Notifying Party considers that the

geographic scope of the two "special mortars", that is to say dry mortar for facades

and tile-fixing, is national insofar as these products have an increased added value

and are sold across the national market and beyond.250


(353) The majority of mortar customers and producers that responded to the market

investigation stated, in line with the Commission's past decisional practice, that the

vast majority of their sales or purchases of dry mortar take place within 120 km of

their plant or location respectively.

(354) First, dry mortar suppliers that responded to the market investigation indicated that

more than 92 % of their total sales of dry construction mortar are supplied within a

radius of 120 km around each plant. Moreover, these suppliers did not provide any

indication that the geographic scope of the market for dry facade mortar and dry tile-

fixing mortar would differ from that for dry construction mortar.251

(355) Second, mortar customers that responded to the market investigation indicated that

96 % of their total purchases of dry construction mortar are supplied from a distance

of up to 120 km from their location. The corresponding figures for dry façade mortar

and dry tile-fixing mortar are 91 % and 86 % respectively.252



considers that the relevant geographic market corresponds to a radius of 120 km

around each of the Parties’ mortar plants.



(357) The Parties are not active in the production and sale of wet mortar or ready-to-use

paste. In Spain, the Parties only commercialise dry pre-mix mortar for the three end

applications, that is to say construction, tile-fixing and facade.253

(358) Cemex's plants are located in the Levante region (Valencia and Alicante) and in other

regions of Spain (Mallorca, Ibiza, Zaragoza, Menorca and Tarragona). Holcim's

plants are located in Alicante, Malaga and Madrid.254

249

Commission’s decision of 4 March 2008 in Case No COMP/M.4898 – Saint Gobain/Maxit,

paragraph 29. 250


See replies to question 28- Phase I questionnaire to customers-cement. 252

See replies to question 10 - Phase I questionnaire to customers- mortar. 253


See Cemex’s reply to the Commission's request for information, 07 March 2014, Question 1.Cemex's

mortar plants in Campo Real (Madrid), St. Feliu de Llobregat (Barcelona) and Malagon (Ciudad Real)

are closed; Holcim's mortar plants in Quart de Poblet (Valencia) and Sevilla are closed.

EN 65 EN


(359) The Notifying Party submits that the proposed transaction will not significantly alter

the competitive structure of any of the local markets in which the Parties' activities in

mortar overlap.255

(360) First, in most of the local markets the overlap between the Parties' activities is either

negligible or the Parties' combined market shares do not exceed [20-30]* %.

(361) Second, in the two local markets where the Parties' combined market shares exceed

[20-30]* % (Buñol and Focalent (construction)), there are a sufficient number of

competitors with sizeable market shares.

(362) Third, there are no significant barriers to entry to the mortar markets in Spain. The

setting-up and operation of a mortar plant is a relatively simple and low cost process.

Although there are certain regulatory barriers relating to the production of mortar,

they do not pose a significant obstacle for new entrants.

(363) Fourth, the Notifying Party argues that both input and customer foreclosure effects

can be excluded in the vertical relationship between the upstream aggregate and grey

cement markets and the downstream mortar markets for the reasons outlined in

section 6.7.3.


(364) The Parties' activities in the production and supply of mortar lead to three affected

markets for construction mortar256

and two affected markets each in respect of tile-

fixing and facade mortar. 257

258

(365) Given the Parties' low market shares, the limited overlaps and the presence of

alternative competitors in the mortar markets, the proposed transaction would not

significantly impede effective competition in those markets.

255


There are other markets where the combined market share would exceed 20 %, namely around Cemex's

plants in Muel (Zaragoza) and Vendrell (Tarragona) and Holcim's plant in Quart de Poblet (Valencia).

However, the increment brought by Holcim in the Muel and Vendrell clusters is [0-5]* % and [0-5]* %

respectively, and therefore these clusters are not considered in the assessment. Additionally, Holcim's

mortar plant in Quart de Poblet was closed in 2013. See Form CO, paragraph 225. 257

The Notifying Party submits that market shares in 2013 do not differ significantly from market shares

for 2012 as estimated in the Form CO. See Cemex's reply to the Commission's request for information,

17 June 2014, Question 5. 258

Holcim closed down its dry mortar production assets in Spain in July 2014. Holcim, however, expects

to continue to market dry mortar in the regions of Levante and Andalusia pursuant to an agreement with

Cementos Capa. See Holcim's reply to the Commission's request for information, 21 August 2014,

Question 1.

EN 67 EN

areas where they are present. Moreover, the vast majority of customers highlighted

the existence of alternative suppliers in all these regions259

and confirmed that the

proposed transaction will not have any impact on price and availability of dry mortar

in the areas where they are present.260

(369) Second, the majority of mortar suppliers that responded to the market investigation

indicated that the proposed transaction will not have any impact on the price of dry

mortar in Spain.261

(370) Third, no third parties have put forward substantiated claims according to which

competition would be significantly impeded.

9.4. Conclusion on mortar


impede effective competition in the relevant markets for mortar.

10. CLINKER



(372) Clinker is the main raw material for cement production. It is produced through the

conversion of limestone in a thermal, chemical reaction to the desired calcined

mineral. Then it is ground and blended with gypsum and/or other components to the

desired cement product, either in a specific grinding mill or within the cement plant

if it is integrated. Clinker can thus be used in-house or sold to third parties (for

example grinding mills).262

(373) The Commission has not previously had to consider the relevant product market for

clinker in the context of a merger case.263

The Spanish Competition Authority,

however, has previously examined clinker as a relevant product market in the context

of a merger case when it is commercialised as an intermediate raw material.264


(374) According to the Notifying Party, clinker is not a separate relevant product market

because it does not have an autonomous economic purpose unrelated to the

manufacture of cement.265


(375) The vast majority of cement producers that responded to the market investigation

stated that clinker cannot be replaced by any other product in the production of

cement.266

259

See replies to question 17 - Phase I questionnaire to customers-mortar. 260

See replies to questions 19-21 - Phase I questionnaire to customers- mortar. 261

See replies to questions 62 - Phase I questionnaire to customers-cement. 262


However the Commission has considered clinker as a relevant product market in the context of an

antitrust procedure. See COMP/F-2/38.401 EN 197-1 Standard - EMC/European Cement Producers,

paragraph 77. 264

CNMC's decision (ex CNC) of 1 April 2008 in Case No C-0054/08 Cementia/BMM, section V.1 (ii). 265


See replies to questions 22 - Phase I questionnaire to producers-cement.

EN 68 EN



considers that clinker constitutes a distinct relevant product market.



(377) The Commission has not previously had to consider the relevant geographic market

for clinker in the context of either an antitrust or merger case. The Spanish

Competition Authority has, however, considered the relevant geographic market for

clinker in the context of a merger case at a national level and regional level (that is to

say the northern and eastern regions of Spain), but left open the exact geographic

market definition.267


(378) According to the Notifying Party, if clinker were to be defined as a relevant product

market distinct from cement itself, its geographic scope would be global or, at least,

EEA-wide given the significant level of cross-border trade flows. In this respect, the

Notifying Party submits that between 2002 and 2012 imported clinker in Spain

amounted to 54.11 million tons. This amount represented almost 20 % of the total

clinker consumed in Spain. A higher percentage (72 %) of the clinker imported into

Spain originated in third countries rather than in EU Member States.268


(379) Respondents to the market investigation stated that clinker travels longer distances

than cement. The market investigation indicated that more than half of the clinker

sold by cement producers in Spain is supplied within a radius exceeding 150 km

from the production plant.269

The market investigation also indicated that although

the volume of imports of clinker into Spain at present is relatively low, as noted in

recital (148), they were significant up to and including 2008 and still occur albeit at a

reduced level.








(381) The Parties produce clinker in their integrated plants namely those located in the

Levante region clusters and the other regions of Spain clusters.

267

In Cementia/BMM, the CNMC referred to the eastern region of Spain as comprising the Autonomous

Communities of Catalonia, Valencia, Murcia and Andalusia. The northern region is not further defined

in that decision. In the previous decision CEMEX/Activos READY MIX ASLAND, the CNMC

referred to the northern region of Spain as comprising the Autonomous Communities of Rioja, Aragon,

Navarra, Galicia, Asturias, Cantabria and the Basque country. 268



EN 69 EN


(382) Regarding non-coordinated effects, the Parties' activities in the production and

supply of clinker would not lead to an affected market if the relevant geographic

market were to be defined as global since the Parties' combined market shares would

be below [10-20]* %. If the relevant geographic market were to be defined as

national, however, the Parties' activities in the production and supply of clinker

would lead to an affected market since the Parties' combined market shares would be

above 20 %. However, given that the Parties' combined market share would remain

below[20-30]* %, and the presence of a number of alternative competitors (namely

CPV as the market leader and six more national competitors as well as the presence

of imports which have been significant in the past), the proposed transaction would

not significantly impede effective competition in this hypothetical market.


effective competition as the merged entity will have market power neither in the

upstream markets for clinker nor in the downstream markets for grey cement. This

conclusion is supported by the following two factors.

(384) First, the majority of clinker customers that responded to the market investigation

stated that there will be sufficient alternatives to the Parties270

and that the proposed

transaction will not have any impact on the price of clinker.271

(385) Second, no third parties have put forward substantiated claims according to which

competition would be significantly impeded.

10.4. Conclusion on clinker


impede effective competition on the relevant market for clinker.

11. CONCLUSION

(387) Therefore, it is concluded that the proposed transaction would not significantly

impede effective competition in the internal market or a substantial part thereof.

270

See replies to question 42 - Phase I questionnaire to producers-cement. 271


EN 70 EN

HAS ADOPTED THIS DECISION:

Article 1

The notified operation whereby Cemex España S.A. acquires sole control of Holcim Assets

within the meaning of Article 3(1)(b) of Council Regulation (EC) No 139/2004 is hereby

declared compatible with the internal market and the EEA Agreement.

Article 2

This Decision is addressed to:

Cemex España, S.A.

C/ Hernández de Tejada, n° 1

28027 Madrid

Spain

Done at Brussels, 9.9.2014

For the Commission

(Signed)

Joaquín ALMUNIA

Vice-President

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